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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002

Or

|   | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For The Transition Period From        To        

_________________

Commission File Number 333-42147

_________________

LAS VEGAS SANDS, INC.
(Exact name of registration as specified in its charter)

(702) 414-1000

Registrant’s telephone number, including Area Code

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months; and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |   |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X|

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes |   | No |X|

The aggregate market value of voting stock held by nonaffiliates of registrant as of June 30, 2002 was $0.

The Company had 1,000,000 shares of common stock outstanding as of March 31, 2003.

Las Vegas Sands, Inc.

Table of Contents

PART I

ITEM 1. — BUSINESS

General

        Las Vegas Sands, Inc. (“LVSI”) and its subsidiaries (collectively, the “Company”) own and operate the Venetian Casino Resort (the “Casino Resort”), a Renaissance Venice-themed resort situated at one of the premier locations on the Las Vegas Strip (the “Strip”). The Casino Resort is located across from The Mirage and the Treasure Island Hotel and Casino. The Casino Resort includes the only all-suites hotel on the Strip with 3,036 suites (the “Hotel”); a gaming facility of approximately 116,000 square feet (the “Casino”); an enclosed retail, dining and entertainment complex of approximately 446,000 net leasable square feet (the “Mall”); and a meeting and conference facility of approximately 500,000 square feet (the “Congress Center”).

        The Casino Resort is physically connected to the approximately 1.15 million square foot Sands Expo and Convention Center (the “Expo Center”), one of the largest facilities in the United States specifically designed for trade shows and conventions. Management believes that the combined facilities of the Casino Resort and the Expo Center (which is separately owned by an affiliate of the Company’s principal stockholder) is one of the largest hotel and meeting complexes in the United States.

        LVSI was incorporated in 1988 under the laws of the State of Nevada. In April 1989, LVSI acquired the Sands Hotel and Casino (the “Sands”) from MGM Grand. LVSI owned and operated the Sands from April 1989 to June 1996 when operations ceased to begin demolition of the Sands and construction of the Casino Resort. Ground breaking for the Casino Resort occurred in April 1997, the entire Casino Resort (excluding the Mall) opened on May 4, 1999, the Mall opened on June 19, 1999 and substantial completion of the entire Casino Resort was achieved on November 12, 1999.

        The Company is constructing an extension to the Casino Resort to add an approximately 1,000-room hotel tower on top of the Casino Resort’s existing parking garage, an approximately 1,000-parking space expansion to the existing parking garage and approximately 150,000 square feet of additional meeting and conference space (the “Phase IA Addition”). The Phase IA Addition is expected to be completed in June 2003. See “–New Developments – Phase IA Addition” and “–Risk Factors – There are Significant Risks Associated with the Company’s Planned Construction Projects, Which Could Adversely Affect its Financial Condition, Results of Operations or Cash Flows.”

        The Government of Macau, People’s Republic of China granted a provisional concession to operate casinos in Macau to Galaxy Casino Company Limited, a joint venture comprised of a subsidiary of the Company and a group of Macau and Hong Kong-based investors. The Company is currently constructing a casino in Macau with an anticipated completion date of February 2004. In addition to the casino the Company is currently constructing, the Company tentatively plans to build a 500-suite hotel, casino and convention center complex, with a Venetian-style theme similar to that of the Company’s Las Vegas property. See “–Risk Factors – There are Significant Risks Associated with the Company’s Planned Construction Projects, Which Could Adversely Affect its Financial Condition, Results of Operations or Cash Flows” and “– The Company May Not Be Able to Raise the Required Funds for the Macau Casino.”

        The Casino Resort was developed on a stand-alone basis as the first phase of a two-phase development. In the second phase of the development, it is contemplated that another similarly sized themed resort (the “Phase II Resort”) will be constructed and developed by a wholly-owned, indirect subsidiary of LVSI (the “Phase II Subsidiary”).

        LVSI is the managing member and owner of 100% of the common equity of Venetian Casino Resort, LLC (“Venetian”). Venetian is the owner and operator of the Hotel and Congress Center, and the owner of the Casino. Under a casino lease (the “Casino Lease”), Venetian leases the Casino to LVSI, which conducts all gaming operations in the Casino Resort. Grand Canal Shops II, LLC, an indirect subsidiary of LVSI (the “New Mall Subsidiary”) owns and operates the Mall. The executive offices of LVSI are located at 3355 Las Vegas Boulevard South, Room 1A, Las Vegas, Nevada 89109 and its telephone number is (702) 414-1000.

        This Annual Report on Form 10-K contains certain forward-looking statements. See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Special Note Regarding Forward – Looking Statements.”

The Casino Resort

        The Hotel

        The Hotel presently has 3,036 single and multiple bedroom suites situated in a 35-story, three-winged tower rising above the Casino. The lobby features a 65-foot domed ceiling decorated with Venetian-themed, fresco-style paintings, a main passageway formed by a barrel-vaulted ceiling carried on ornamental columns, and a replica of the unique three dimensional-style marble floors found in Venetian palaces.

        A typical Hotel suite approximates 655 to 735 square feet, consisting of a raised sleeping area and bathroom and a sunken living/working area. The suite’s bi-level configuration creates a multi-function living space in which guests can sleep, work and entertain and includes two queen-size beds or one king-size bed, a writing desk, dual-line speaker phones, a fax machine and a sitting area. Approximately 318 of the suites are of larger size for use by gaming customers.

        The Casino Resort’s average daily room rates were $196 in each of the years ended December 31, 2002 and 2001. Gross room revenues during the year ended December 31, 2002 were $206.7 million, representing an increase of $2.5 million when compared to $204.2 million during 2001. During 2002, the occupancy rate for available guestrooms (including complementaries) in the Hotel was 95.6%.

        The Hotel leases space to eight restaurants to well known restaurateurs, (including Emeril Legasse and Wolf Gang Puck), that are located adjacent to the Casino and five other food outlets located in a Venetian-style market food court located at the casino level of the Hotel. Live entertainment is offered at the 50,000 square foot entertainment complex, “C2K”. In addition, the Hotel provides a variety of amenities for its guests, including a state-of-the-art health spa, operated by Canyon Ranch Management, LLC, with massage and treatment rooms, exercise and fitness areas. The Hotel features an outdoor swimming complex (including three pools, spas, pool bars and cabanas) surrounded by gardens, waterways, fountains and sculptures.

        In addition to the Congress Center, the Hotel includes approximately 63,000 square feet of exhibition hall space that was completed in October 2001, including the Guggenheim/Hermitage Museum, an art museum featuring masterpiece collections from the Guggenheim Museum in New York, the Hermitage in Saint Petersburg, Russia and other museums. Approximately 59,000 square feet of the exhibition hall space housed the Guggenheim “Art of the Motorcycle” exhibit until January 2003. The Company is currently evaluating the future use of this space.

        The Casino

        The Casino has 116,000 square feet of gaming space and is situated adjacent to the Hotel lobby. The Casino floor is accessible from each of the Hotel, the Mall, the Congress Center, the Expo Center and the Strip. The Casino is marketed to attract a broad base of patrons, with a specific focus on frequent premium gaming customers. The Company markets the Casino directly to this gaming market segment using database-marketing techniques, slot clubs and traditional incentives such as reduced room rates and complimentary meals and suites. The Company offers “high roller” gaming customers premium suites and special hotel and casino services.

        The Casino environment is stylized to resemble a Venetian “palazzo,” with architectural and interior design features representative of Venice’s Renaissance era and its adjacent amenities include several “signature” restaurants such as Emeril Lagasse’s Delmonico and Piero Selvaggio’s Valentino. The ceiling in the table games area features fresco-style paintings of Venetian palaces. The gaming facilities include approximately 2,035 slot machines of various denominations, including popular multi-property, linked progressive games. A high-end slot area, with a private lounge, provides slot customers with premium slot products and services. The Casino’s approximately 127 table games (excluding baccarat tables) include the traditional games of blackjack, craps and roulette, Asian games such as “Pai Gow” and “Pai Gow Poker,” and popular progressive table games such as “Caribbean Stud Poker” and “Let It Ride.” In addition, the Casino offers gaming customers an upscale sportsbook room and an upscale gaming salon featuring baccarat, blackjack and roulette tables. The gaming salon is specially designed for premium, “high roller” gaming, with baccarat, blackjack and roulette, direct access to private cash-out windows at the Casino cage and direct access to the Casino’s credit department.

        The Mall

        The Mall offers approximately 446,000 net leasable square feet of shopping, dining and entertainment space located on two levels within the Casino Resort’s main structure, between the Casino level and the Hotel tower and in a separate approximately 38,000 square foot retail annex adjacent to the Casino Resort’s main structure and directly accessible from the Strip. The Mall includes eight restaurants, six food court outlets, three specialty shops and 58 retail stores. Visitors and guests can enter the Mall from several different directions, including from the Strip via a moving sidewalk, from the main gaming area of the Casino via escalators, from the Expo Center through the Congress Center, from a cross-over bridge across the Strip and directly from the Hotel.

        The Mall offers an array of quality dining experiences, including upscale restaurants such as Wolfgang Puck’s Postrio, offering international and American regional cuisines. The Mall’s retail offerings include exclusive showcase boutiques, popular brand name mid-priced stores and themed entertainment concepts. Premium branded tenants in the Mall include Mikimoto, Movado, Burberry and Jimmy Choo. The restaurants and stores are set along an approximately one-quarter mile Venetian-themed streetscape and front on the Venetian-themed canal running its length and grouped in “piazza”-style settings. Store and restaurant facades are designed to project the Venetian theme.

        In both 2002 and 2001, the Mall leased approximately 90% of its gross leasable space at an average of approximately $100 per leasable square foot. Additional tenants and increased proceeds from rents raised Mall revenues to $36.5 million in 2002 from $33.5 million in 2001. The average term of a lease in the Mall is 10 years.

        The Expo Center and the Congress Center

        With over 1.15 million gross square feet of exhibit and meeting space, including four exhibit halls and 20 meeting rooms, the separately owned and operated Expo Center is one of the largest trade show and convention facilities in the United States (as measured by net leasable square footage). As part of the Casino Resort, the Company owns and operates the Congress Center, an approximately 500,000 gross square foot meeting and conference facility which links the Expo Center and the rest of the Casino Resort. The Congress Center includes an approximately 85,000 square foot column-free “Venetian Ballroom,” an approximately 13,500 square foot “Palazzo Ballroom”, a meeting complex of 42 individual rooms which can be combined to create three additional ballrooms and an approximately 105,000 square foot exhibition hall. Together, the Expo Center and the Congress Center offer nearly 1.65 million square feet of state-of-the-art exhibition and meeting facilities, which can be configured to provide 108 meeting rooms or accommodate large-scale multi-media events. The Company is also constructing 150,000 square feet of additional meeting and conference facility space to the Casino Resort. See “–New Developments – Phase IA Addition.”

        Management markets the Congress Center to complement the operations of the Expo Center by target marketing the Congress Center for business conferences and upscale business events typically held during the mid-week period, thereby generating room-night demand and driving average daily room rates during the weekday move-in/move-out phases of Expo Center events. The Company’s goal is to draw from attendees and exhibitors at Expo Center events and from attendees of Congress Center events to maintain weekday room-night demand at the Hotel from this higher budget market segment, when room demand would otherwise be derived from the lower budget tour and travel group market segment.

        In 2002, approximately 933,000 visitors attended trade shows and conventions at the Expo Center during 121 show days. The Expo Center hosted 17 events on the 2002 Trade Show Week 200 list of the largest trade shows in the United States in 2002, including the Spring and Fall Western Shoe Show and JCK Jewelry Show, as well as the Automotive Service Industry Association Week, each of which were multiple-location events.

        The Company has no ownership of or financial interest in the Expo Center or Interface Group-Nevada, Inc. (“Interface”), the owner of the Expo Center, and does not exercise any control over the business or management of the Expo Center or Interface. All of the capital stock of Interface is beneficially owned by Sheldon G. Adelson, the principal stockholder of the Company (the “Principal Stockholder”). See “Item 13 – Certain Relationships and Related Transactions – Possible Conflicts of Interest.”

        Venetian, the New Mall Subsidiary, Interface and Lido Casino Resort, LLC are parties to an Amended and Restated Reciprocal Easement, Use and Operating Agreement (the “Cooperation Agreement”) which, among other things, provides for the integrated operation of all the facilities. Interface, the New Mall Subsidiary and Venetian allocate expenses shared by the Expo Center, the Casino Resort and the Mall. In addition, the Company and Interface jointly market the Hotel and Casino, the Mall, the Congress Center and the Expo Center. Until December 31, 2010, Interface will use commercially reasonable efforts to have the Hotel designated as the “headquarters hotel” for trade show and convention events at the Expo Center, and the Company will use commercially reasonable efforts to promote the use and occupancy of the Expo Center. In order to obtain the Casino Resort’s “headquarters hotel” designation, the Company has agreed with Interface that, except under certain circumstances, trade shows of the type generally held at the Expo Center will not be held in the Congress Center. The Company will be able to conduct or permit to be conducted at the meeting and conference space that is a part of the Phase IA Addition and the Congress Center, tradeshows and expositions of the type generally held at the Expo Center so long as such space is at most 125,000 square feet and the Company enters into a preferred reservation system agreement with Interface. Trade show and convention promoters are under no obligation to select the Casino Resort as the “headquarters hotel” for their events. See “Item 13 – Certain Relationships and Related Transactions – Cooperation Agreement.”

New Developments

        Phase IA Addition

        During June 2002, the Company re-commenced construction of the Phase IA Addition. Due to the travel disruption to Las Vegas during the fourth quarter of 2001 (following the terrorist attacks of September 11, 2001), the Company had previously suspended construction of the Phase IA Addition. The Company anticipates that the Phase IA Addition construction will be completed in June 2003 with a remaining cost to complete of approximately $149.0 million, and an additional $8.9 million to expand the central HVAC facility (the “HVAC Plant”) to accommodate the Phase IA Addition, as of December 31, 2002. Due to the inherent risks in large construction projects, however, there can be no assurance that the Phase IA Addition will be constructed without any substantial delays or cost increases. See “–Risk Factors – There are Significant Risks Associated with the Company’s Planned Construction Projects, Which Could Adversely Affect its Financial Condition, Results of Operations or Cash Flows.”

Macau Casino Project

        Concession

        On June 26, 2002, the Government of the Macau Special Administrative Region of the People’s Republic of China (“Macau”) granted a provisional concession to operate casinos in Macau to Galaxy Casino Company Limited, a joint venture comprised of a subsidiary of the Company (the “Macau Subsidiary”) and a group of Macau and Hong Kong-based investors. Macau, the former Portuguese colony located near Hong Kong, currently has annual gaming revenues of approximately $2.0 to $2.5 billion and is widely regarded as one of the fastest growing gaming markets in the world. Approximately 10 million visitors arrived in Macau during 2001 (the latest available count), according to the Macau Tourism Board. The following factors are expected to continue to significantly improve Macau’s status as a world-class gaming and resort destination: (i) the increased ease of access from Hong Kong, China and Taiwan and other Asian regional gaming markets (where casinos are currently banned); (ii) significant foreign and domestic investment in new and expanded gaming products; and (iii) the development of Disneyland China and other new resort developments in the region. The Company believes that the Macau opportunity provides an international platform to expand its premier Venetian brand and create increased diversification of, and a new source of significant growth for, its revenue base.

        Galaxy Casino Company Limited was one of three entities to be granted a casino license in Macau. During December 2002, the joint venture participants entered into concession, sub-concession, and related agreements. The sub-concession agreement with the joint venture participants provides that a wholly owned subsidiary of the Company (“Venetian Macau”) will develop and operate casino projects separate from its other joint venture partners. It is expected that the joint venture participants will in turn develop hotel and casino projects separate from the Company.

        Under the terms of Venetian Macau’s agreements with the government of Macau, Venetian Macau has certain financial obligations to the Government of Macau or is obligated to pay for certain costs of developing and constructing the Macau Casino in Macau. Venetian Macau is committed to invest 4.4 billion Macau patacas (approximately $531.7 million at current exchange rates as of December 31, 2002) under its agreement with the government of Macau in various development projects until March 31, 2007.

        The initial term of the Venetian Macau sub-concession agreement is 20 years, beginning on June 27, 2002 and ending on June 26, 2022. The sub-concession agreement can be terminated after the fifteenth year, upon one year’s prior notice and upon fair and reasonable compensation for the balance of the term. Venetian Macau and each of the other parties have the following obligations under the sub-concession agreement:

        Additionally, Venetian Macau is subject to reporting requirements to Macau’s Gambling Inspection and Coordination Bureau on a yearly basis, in particular with respect to the number of gaming tables and electrical or mechanical gaming machines that it intends to operate during the following year. As part of the granting of this concession, Venetian Macau will have to pay a variable premium, subject to change, to Macau based on (i) a fixed yearly payment, and (ii) variable payments based on the number and type of gaming tables used by Venetian Macau. Venetian Macau will also have to pay a special gaming tax of 35% and contribute 4% of gross gaming revenue to Macau.

        Macau Casino

        Venetian Macau is currently constructing a casino (“Macau Casino”), with an anticipated completion date of February 2004, and in addition, tentatively plans to build a 500-suite hotel, casino and convention center complex, with a Venetian-style theme similar to that of the Company’s Las Vegas property. The Company currently anticipates that the Macau Casino construction will be completed at a total cost of $210.0 million. Due to inherent risks in large construction projects in a foreign jurisdiction, however, there can be no assurance that the Macau Casino will be constructed without substantial delays or cost increases. See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and “–Risk Factors – There are Significant Risks Associated with the Company’s Planned Construction Projects, Which Could Adversely Affect its Financial Condition, Results of Operations or Cash Flows”, “– The Company May Not Be Able to Raise the Required Funds for the Macau Casino” and “–Certain Nevada Gaming Laws Apply to the Company’s Planned Gaming Activities and Associations in Macau and Alderney.”

        During the year ended December 31, 2002, the Company incurred $5.9 million of pre-opening and development expenses and $2.4 million of capital expenditures associated with the development of the Macau Casino Project.

Internet Gaming and Other New Business Ventures

        The Company is actively pursuing the possibility of developing and operating an Internet gaming site and is currently exploring other business opportunities for expansion, including Native American gaming, and the possibility of operating casino resorts in certain foreign jurisdictions. During January 2002, the Company entered into a joint venture agreement to assess the feasibility of developing and operating an Internet gaming site. Management estimates that the Company is committed to contribute approximately $1.0 million, approximately one-third of the required capital, to the joint venture during the next year. After recovery of each partner’s initial capital contribution, the Company will receive 50% to 80% of the net profit of the joint venture, based upon an increasing scale of net profit (if any). The joint venture provides that the agreement will be automatically terminated should the Company fail to obtain any required regulatory approvals from the government of Alderney, the Nevada gaming authorities or any other applicable jurisdiction prior to launching its operations. During March 2003, a subsidiary of the Company received an interactive gaming license and an electronic betting center license from the Alderney Gambling Control Commission. The Company’s Internet and other projects are in developmental or exploratory stages and there can be no assurance that any of these ventures will prove to be attractive opportunities, or that if implemented they will be successful. The Company intends to continue to explore similar new business opportunities.

Business and Marketing Strategy

        The Company’s primary business objective is to provide a premium destination casino resort experience in order to drive superior returns on invested capital and to increase asset value. To achieve this objective, the Company: (i) operates a “must-see” destination resort; (ii) captures premium room rates through a differentiated all-suites product; (iii) drives hotel occupancy, casino use and mall shopping through the link to the Expo Center and the Congress Center; (iv) caters to a higher budget customer mix by offering a unique combination of hospitality and gaming facilities; (v) leverages the Casino Resort’s premium co-branding strategy to drive revenues; and (vi) targets premium gaming customers.

        Operate a "Must-See" Destination Resort

        The Casino Resort, with its extensive theming, dining, shopping and entertainment, is a “must-see” destination located at the heart of the Strip. The Casino Resort is distinctly themed to provide visitors with the sense of being surrounded by the architecture, music, art and history of Renaissance Venice. The Venetian-themed setting along the Casino Resort’s frontage on the Strip includes waterways, gondolas and replicas of Venetian landmarks, such as the Doge’s Palace, the Rialto Bridge, the Ca Doro and the Campanile Tower. The Mall features a one-quarter mile Venetian streetscape, with intimate “piazza”-style settings. A 630-foot canal runs along the Venetian streetscape, with gondolas and waterside cafes and crossed by authentically styled Venetian bridges. Management believes that these attractions generate significant room demand and foot traffic.

        The Casino Resort has approximately 740 feet of frontage on the east side of the Strip and is located next to Harrah’s and across from some of the most visited casino resorts and attractions on the Strip, including The Mirage, the Treasure Island Hotel and Casino and The Forum Shops at Caesars Palace Hotel.

        Capture Premium Room Rates through Differentiated All-Suites Product

        The typical Hotel suite ranges in size from approximately 655 square feet to 735 square feet (compared to approximately 360 to 400 square feet on average for a standard room in competing facilities on the Strip), and consists of a sunken living/working area and a raised sleeping area with a marble bathroom; each area has its own television entertainment center. Each suite living/working area includes a sitting area and a writing desk and offers business amenities such as dual-line speakerphones, a fax machine and dataport access. The bathrooms are oversized, featuring a separate bathtub and shower, dual sinks and a telephone. In addition, the Hotel offers larger suites, including the “Presidential” and penthouse suites.

        The Hotel offers the only all-suites product on the Strip with first-class services, amenities for business travelers, such as in-room fax machines, two phone lines and high-end resort facilities. In 2002, the Hotel was awarded the Exxon Mobil “Four Star Award,” Conde Nast’s “Best 50 Hotels in North America,” AAA’s “Four Diamond Award” and Meetings and Convention Magazine’s Prestigious “Gold Key Award” for meeting hotels in the United States. In management’s experience, business and leisure travelers consider suites desirable, superior accommodations. For business travelers, the Hotel’s suites, which accommodate informal business meetings and social gatherings, offer guests a unique, single location in which to work and entertain in close proximity to the Expo Center and the Strip. Leisure travelers appreciate both the Hotel’s spacious suites and extensive facilities. The Company believes that the all-suites format, together with the Casino Resort’s many other unique attributes, results in a highly differentiated destination resort product, allow for premium pricing on rooms and provide a competitive advantage over other hotel/casino properties on the Strip.

        The Company’s mix of hotel sales is as follows: group and convention room sales are 37.0%; hosted casino customers 12.9%; wholesale 12.2% and free and independent travelers 37.9% of total sales. The Hotel’s average daily room rates were $196 in 2002.

        Drive Hotel Occupancy, Casino Use and Mall Shopping through the Link to the Expo Center and the Congress Center

        The Casino Resort is the first themed entertainment resort in Las Vegas designed specifically to accommodate large-scale trade shows, conventions, conferences and meetings. These trade shows, conventions, conferences and meetings often draw more attendees than the Hotel can accommodate and generate additional non-Hotel traffic. The Expo Center and the Congress Center provide recurring, predictable demand for mid-week room nights from business travelers. The Company’s diverse business model draws convention attendees from all parts of the United States and the world. In connection with 121 show days during 2002, approximately 933,000 visitors attended trade shows and conventions at the Expo Center. The Hotel had a mid-week occupancy rate of 93.8% in 2002 (compared to an 80.9% mid-week average occupancy rate on the Strip), due in large part to the Casino Resort’s trade show and convention business. In 2001, the Hotel’s average daily room rate was approximately $196. Pursuant to the Cooperation Agreement, the owner of the Expo Center markets the Casino Resort to promoters of Expo Center trade show conventions and other events as the “headquarters hotel” for such events. The Casino Resort offers attendees of events at the Expo Center and the Congress Center the most convenient hotel accommodations in Las Vegas.

        Cater to a Higher-Budget Customer Mix by Offering a Unique Combination of Hospitality and Gaming Facilities

        Management markets the Casino Resort to attract higher-budget business travelers and free and independent travelers, resulting in a higher-budget customer mix both on weekdays and on weekends. By appealing to customers in these upscale market segments, the Company has reduced its reliance on the lower-budget tour and travel market. Management believes that business travelers typically pay more for rooms and spend more on entertainment than weekday customers in other categories, such as tour groups. Management believes that the Casino Resort’s central location at the heart of the Strip adjacent to the Expo Center, and its all-suites hotel product all combine to allow it to compete effectively for the higher-budget mid-week trade show, convention and meeting attendees. On both weekdays and weekends, the all-suites product at the Hotel appeals to free and independent leisure travelers and “high-roller” gaming customers, also segments of the travel market who spend more on rooms and entertainment.

        Leverage the Casino Resort's Premium Co-Branding Strategy to Drive Revenues

        The Company expects to build upon awareness of the Venetian brand by continuing to attract a unique collection of “signature” restaurant concepts and premier global retail brands to the Casino Resort. This strategy allows the Company to focus on its core competency of providing first-class hotel and meeting facilities while attracting additional guests and foot traffic because of its own brand name and its concentration of other premier brands. The Casino Resort has been designed such that foot traffic from the Strip, the Expo Center, the Congress Center and the Hotel are funneled through the Casino floor in order to attract and retain a broad base of Casino patrons. The Company seeks to maximize guest spending from the Casino Resort’s target markets by offering a concentration of fine restaurants, exclusive boutiques, the Canyon Ranch health spa and the 50,000 square foot entertainment complex, “C2K”. Several well-known restaurateurs operate “signature” restaurants on the premises, such as Emeril Lagasse’s Delmonico and Wolfgang Puck’s Postrio. The Mall includes premium branded retailers such as Mikimoto and Burberry and nationally recognized retailers such as Banana Republic, Kenneth Cole and Brookstone. In addition, the Casino Resort includes the Guggenheim Hermitage Museum, which houses various art exhibits in conjunction with the Guggenheim Museum in New York and the Hermitage Museum in St. Petersburg, Russia. The co-branding strategy enhances the Casino Resort’s appeal to the higher budget room guests. The Company believes that the Casino Resort’s premier location on the Strip, its extensive theming as well as its established and growing concentration of “signature” restaurant concepts and premier global retail brands have been an effective strategy for driving revenues and the awareness of the Venetian brand. The Company expects to build upon the Venetian’s brand awareness to provide continued revenue growth opportunities from retail and restaurants to drive Hotel room rates and Casino patronage.

        Target Premium Gaming Customers

        Management believes that the Casino Resort’s all-suites product, themed atmosphere and high-end amenities, including premium restaurants and shops, offer gaming customers a unique Las Vegas experience. The Company actively markets the Casino to frequent premium gaming customers. In particular, the Company seeks to attract “high roller” gaming customers by offering premium suites and special hotel services. Because of the all-suites format in the Hotel, the Casino Resort is able to offer many gaming customers complimentary suites (considered premium accommodations in Las Vegas) during high occupancy periods, such as weekends and holidays, when they would not be offered such suites by the Company’s competitors. The Casino Resort is the only all-suites resort on the Strip with facilities and amenities designed to attract premium gaming customers. The premium gaming customers generally require the issuance of casino credit and in some instances pre-arranged discounts of losses.

The Las Vegas Market

        Las Vegas is one of the fastest-growing and largest entertainment markets in the country. Las Vegas hotel occupancy rates are among the highest of any major market in the United States. According to the Las Vegas Convention and Visitors Authority (the “LVCVA”), the number of visitors traveling to Las Vegas has increased at a steady and significant rate for the last ten years from 21.9 million visitors in 1992 to 35.1 million visitors in 2002, a compound annual growth rate of 4.8%. In addition, the population of Las Vegas has grown from approximately 850,000 in 1992 to approximately 1,550,000 in 2002, a compound annual growth rate of 6.2%. Management believes that the growth in the Las Vegas market has been enhanced by a dedicated program of the LVCVA and major Las Vegas hotels to promote Las Vegas as an exciting vacation and convention site, the increased capacity of McCarran International Airport and the introduction of large, themed destination resorts in Las Vegas.

        Although visitation, demand and expectations may be impacted by international and domestic events and other factors and conditions, the Company expects hotel occupancy rates in Las Vegas to remain high as a result of the sustained growth in the number of visitors traveling to Las Vegas and the lack of new construction in Las Vegas, other than Le Reve, an approximately 2,500 room resort to be built on the site of the former Desert Inn, one block north of the Casino Resort on the corner of Las Vegas Boulevard and Sands Avenue, and anticipated to open in April 2005.

        Las Vegas as a Trade Show, Convention and Meeting Destination

        In 2002, according to the LVCVA, Las Vegas was the most popular trade show destination (with a 25% market share of the Trade Show Week 200 Shows in terms of net square footage) and the fourth most popular convention destination in the United States. In 1992, approximately 2.0 million persons attended trade shows and conventions in Las Vegas and spent approximately $1.7 billion. In 2002, the number of trade show and convention attendees had increased to 5.1 million and the amount spent by trade show and convention attendees was approximately $5.9 billion.

        Trade shows are held for the purpose of getting sellers and buyers of products or services together in order to conduct business. Trade shows differ from conventions in that trade shows typically require substantial amounts of space for exhibition purposes and participant circulation. Conventions generally are gatherings of companies or groups that require less space for breakout meetings and general meetings of the overall group. Las Vegas offers trade shows and conventions a unique infrastructure for handling the world’s largest shows, including the concentration of 48,000 hotel rooms located on the Strip, three convention centers (the Expo Center, Mandalay Bay Convention Center, and the Las Vegas Convention Center (the “LVCC”)) with a total of approximately 6.9 million square feet of convention and exhibition space, convenient air service from major cities throughout the United States and other countries, and significant entertainment attractions. In addition to the Expo Center, Mandalay Bay Convention Center, and the LVCC, the MGM Grand Hotel and Casino has a conference and meeting facility of approximately 300,000 gross square feet, and the Mirage has a 100,000 gross square feet of meeting space. Mandalay Bay opened its approximately 1.8 million square foot convention center during January 2003. Management believes that Las Vegas will continue to evolve as the country’s preferred trade show and convention destination.

        Expanding Hotel Market

        During 2002, Las Vegas was among the most popular vacation destinations in the United States. Las Vegas has experienced a period of rapid hotel development with the number of hotel and motel rooms in Las Vegas increasing by 65% over the last 10 years, from 76,923 in 1992 to 126,787 in 2002. The Company expects that the concentration of quality themed casino hotels and resorts will increase visitor interest in Las Vegas as a business event and vacation destination, and, as a result, increase overall demand for hotel rooms, gaming and entertainment.

        Growth of Las Vegas Retail Sector and Non-Gaming Revenue Expenditures

        In order to draw additional visitors, an increasing number of destination resorts are developing non-gaming entertainment to complement their gaming activities. According to the LVCVA, while gaming revenues have increased from $4.4 billion in 1992 to $7.6 billion in 2002 (a compound annual growth rate of 5.6%), non-gaming tourist revenues increased from $10.2 billion to $23.8 billion over the same period (a compound annual growth rate of 8.8%). The newer, large themed Las Vegas destination resorts have been designed to capitalize on this growth by providing better quality hotel rooms at higher rates and by providing expanded shopping, dining and entertainment opportunities to their patrons in addition to gaming.

        Infrastructure Improvements

        Clark County and metropolitan Las Vegas have completed several infrastructure improvements to accommodate the increase in travel to Las Vegas by all modes of transportation. According to the LVCVA, in 2002 visitors to Las Vegas arrived by the following methods of transportation: 45% by air; 40% by auto; 8% by recreational vehicle; and 7% by bus.

        McCarran International Airport Expansion

        During the past five years, the facilities of McCarran International Airport have been expanded to accommodate the increased number of airlines and passengers that it services. The number of passengers traveling through McCarran International Airport has increased from 20.9 million in 1992 to 35.0 million in 2002. Long-term expansion plans for McCarran International Airport provide for additional runway and related areas (a new runway was completed in October 1997 and a new terminal and additional gates were completed in 1998).

Competition

        The casino/hotel industry is highly competitive. Strip hotels compete with other hotels on the Strip and with other hotels in downtown Las Vegas. The Casino Resort also competes with a large number of hotels and motels near Las Vegas. Many of the Company’s competitors are subsidiaries or divisions of large public companies and may have greater financial and other resources than the Company.

        Hotel/Casino Properties

        Competitors of the Casino Resort include themed resorts on the Strip, such as The Bellagio, Mandalay Bay and Paris. In November 2002, Steve Wynn began construction of the Le Reve. Le Reve is a 2,500 hotel-room resort and casino being constructed on the site of the former Desert Inn located on Sands Avenue across from the site of the anticipated Phase II Resort, with an expected completion date of April 2005. During 2002, Mandalay Bay and Bellagio each announced the planned construction of 1,000 hotel room additions. Management is not aware of any other new significant developments of casino properties in Las Vegas in the near future. The Casino Resort may also compete with the Phase II Resort, to the extent its business is not complementary to that of the Casino Resort.

        The Company believes that themed resorts are generally more successful at generating higher traffic volumes and higher revenues and operating income than the large-scale non-themed properties in Las Vegas. Themed resorts compete on the basis of the quality of theming, as well as on more traditional bases, such as quality of rooms, pricing and location. Themed resorts tend to be clustered on the Strip, creating a critical mass of entertainment experiences which generate significant traffic for the themed resorts as a group, thereby capturing a larger portion of the Las Vegas hotel and gaming market than non-themed properties. The Company believes that the existence of other themed resorts in close proximity to the Casino Resort directly benefits the Casino Resort. The Casino Resort is part of a cluster of themed properties, which includes The Mirage, the Treasure Island Hotel and Casino, The Bellagio and The Forum Shops at Caesars Palace Hotel, and may in the future also include Le Reve and the Phase II Resort.

        In addition to the advantages of being a centrally-located, themed resort, the Cooperation Agreement and the Casino Resort’s direct connection with the Expo Center provide the Casino Resort with a unique tie-in to one of the premier trade show and convention facilities in the United States. With these competitive advantages, the Casino Resort is positioned to appeal to the mid-week meeting, trade show and convention market composed of customers who pay higher average room rates and have higher average travel budgets than other categories of weekday customers, such as tour groups.

        The hotel-casino operation of the Casino Resort also competes, to some extent, with other hotel-casino facilities in Nevada and in Atlantic City, hotel/casino and other resort facilities elsewhere in the country and the world, Internet gaming web sites and state lotteries. In addition, certain states have legalized, and others may legalize, casino gaming in specific areas. The passage of the Indian Gaming Regulatory Act in 1988, for example, has led to rapid increases in Native American gaming operations. Such proliferation of gaming venues could significantly and adversely affect the business of the Company. In particular, the legalization of casino gaming in or near major metropolitan areas, such as New York, Los Angeles, San Francisco and Boston, from which the Company attracts customers, could have a material adverse effect on the business of the Company. In October 2001, the New York legislature approved a bill for expanded casino gaming on Native American reservations in that state. The expansion of gaming in New York could also have a material adverse effect on the business of the Company.

        Trade Show and Convention Facilities

        The Expo Center, the Congress Center and Las Vegas generally compete with trade show and convention facilities located in and around major U.S. cities, including Atlanta, Chicago, New York and Orlando. Within Las Vegas, the Expo Center and the Congress Center compete with the LVCC, which is located off the Strip and currently has 3.2 million gross square feet of convention and exhibit facilities, including over 1.0 million square feet of new meeting and exhibition space that was added in 2001 (the “LVCC Expansion”). In addition to the LVCC competition, Mandalay Bay opened an approximately 1.8 million square foot convention center during January 2003. The MGM Grand Hotel and Casino has a conference and meeting facility of approximately 300,000 square feet and the Mirage has a 100,000 gross square feet of meeting space. The conference and meeting facilities at these hotel/resorts are the Congress Center’s primary competition. The Company expects that the LVCC and the Mandalay Bay Convention Center will be the primary competitors of the Expo Center. To the extent that any of the competitors of the Casino Resort can offer a hotel/casino experience that is integrated with substantial trade show and convention, conference and meeting facilities, the Casino Resort’s competitive advantage in attracting trade show and convention meeting and conference attendees could be adversely affected. Other cities such as Boston, Orlando and Pittsburgh are also in the process of developing, or have announced plans to develop, convention centers and other meeting, trade and exhibition facilities. The Company’s competitors discussed above could in the long term materially adversely affect the Company.

        Mall

        The Mall competes with both themed resorts, which offer shopping, dining and entertainment opportunities to their patrons, and other retail malls in or near Las Vegas. The Mall’s direct competition includes The Forum Shops at Caesars Palace and The Desert Passage Shops at the Aladdin. Park Place Entertainment Corp. recently announced an approximately a 200,000 square-foot expansion of The Forum Shops at Caesars Palace. The Mall also competes with The Fashion Show Mall, a more traditional mall located near the Casino Resort, which is currently undergoing an expansion that will almost double its size. In the future, the Mall may also compete with the planned retail, dining and entertainment facilities in the Phase II Resort. Mandalay Resort Group had also announced, but has since suspended, the development of a retail center near its new Mandalay Bay Resort.

        Macau

        In Macau, the Company expects to compete with the other two parties granted casino licenses, which are a group led by Steve Wynn and a group led by Stanley Ho, who, at that time, held Macau’s only existing casino license. The Company also expects to compete with its partners in the Galaxy Casino Company Limited joint venture.

Advertising and Marketing

        The Company advertises in many types of media, including television, radio, newspapers, magazines and billboards, to promote general market awareness of the Casino Resort as a unique vacation, business and convention destination due to its first-class hotel, casino, retail stores and restaurants. The Mall tenants also pursue their own general advertising and promotional activity, which benefits the Mall. The Company actively engages in direct marketing which is targeted at specific market segments, such as the meeting, convention and trade show market and the premium gaming market, and database marketing which focuses on high-frequency, high-margin market segments such as the “high-roller” gaming market. The Company uses a preview center featuring a full-scale model suite in the Expo Center to market Casino Resort and Expo Center events.

Agreements Relating to the Casino Resort

        As of December 31, 1999, construction of the Casino Resort and the Mall was complete and virtually all construction costs had been paid. The Company is currently involved in various lawsuits, has asserted various claims against various parties, and has had various claims asserted against it by various parties, in connection with the construction of the Casino Resort. The Company is vigorously pursuing these claims and vigorously defending itself in all relevant legal proceedings. See “Item 3 – Legal Proceedings.”

        Cooperation Agreement

        The Company’s business plan calls for each of the Casino Resort, the Mall, the Expo Center and if built, the Phase II Resort, though separately owned, to be integrally-related components of one facility. In establishing the terms for the integrated operation of these components, the Cooperation Agreement sets forth agreements regarding, among other things, encroachments, easements, operating standards, maintenance requirements, insurance requirements, casualty and condemnation, joint marketing, the construction of the Phase II Resort, and the sharing of some facilities and related costs. Subject to applicable law, the Cooperation Agreement binds all current and future owners of the Expo Center, the Casino Resort, the Mall and the Phase II Resort (and the land on which the Phase II Resort is expected to be built), and has priority over the liens securing the Company’s new credit facility and the Company’s 11% mortgage notes due 2010 (the “Mortgage Notes”) and any liens securing any indebtedness of the Mall, the Expo Center or Phase II Resort. Accordingly, subject to applicable law, the obligations in the Cooperation Agreement will “run with the land” if any of the components change hands.

        Operating Covenants

        The Cooperation Agreement regulates certain aspects of the operation of the Expo Center, the Mall and the Casino Resort. For example, Under the Cooperation Agreement, the Company is obligated to operate the Casino Resort continuously and to use it exclusively in accordance with standards of first-class Las Vegas Boulevard style hotels, casinos and retail and restaurant complexes. In turn, the New Mall Subsidiary is obligated to operate the Mall exclusively in accordance with standards of first-class restaurant and retail complexes, and Interface is obligated to operate and to use the Expo Center exclusively in accordance with standards of first-class convention, trade show and exposition centers. The Cooperation Agreement also provides that the Company will not and the New Mall Subsidiary will not (and will not permit any other person to) own, operate, lease, license or manage any building or other facility, at or in the Casino Resort, Phase II Resort, the Mall or the land on which the Casino Resort, the Phase II Resort or the Mall sits, that provides space for shows or expositions of the type generally held at the Expo Center. The Company will be able to conduct or permit to be conducted at the meeting and conference space that is a part of the Phase IA Addition, and at the Phase II Resort, tradeshows or expositions of the type generally held at the Expo Center so long as such space is at most 125,000 square feet, and the Company enters into preferred reservation system agreements with Interface that will govern the booking of exposition and tradeshows in the Phase IA Addition meeting space and in the Phase II Resort, and agreements for Interface to provide audio-visual, telecommunications, electrical, janitorial and other related services to group customers of the Phase IA Addition meeting space or the Phase II Resort. See “Item 13 – Certain Relationships and Related Transactions – Preferred Reservation System Agreement” and “–Meeting Services Agreement.”

        Additionally, until December 31, 2010, Interface, upon the Company’s request, will use commercially reasonable efforts to have the Casino Resort designated as the “headquarters hotel” for trade show and convention events at the Expo Center. In turn, the Company will use commercially reasonable efforts to promote the use and occupancy of the Expo Center.

        Further, Interface agreed under the Cooperation Agreement that, until such time as the indebtedness under the Mortgage Notes has been paid in full, Interface will not incur additional debt secured by the Expo Center if such additional debt will cause the aggregate indebtedness secured by the Expo Center to exceed the greater of 85% of the then fair market value of the Expo Center or $140.0 million plus any additional amounts permitted to be advanced for equipment leases or equipment financings under the terms of the mortgages encumbering the Expo Center in 1997.

        In addition, subject to certain exceptions, until December 31, 2010, Interface will not voluntarily dispose of its interest in the Expo Center and interest in Interface, except to a buyer of the Casino Resort.

        Maintenance and Repair

        Venetian must maintain the Casino Resort as well as some common areas and common facilities that are to be shared with the Mall and the Expo Center. The cost of maintenance of all shared common areas and common facilities is to be shared by the Company, the New Mall Subsidiary and Interface. The New Mall Subsidiary must maintain, repair and restore the Mall and all common areas and common facilities located in the Mall, and Interface must maintain, repair and restore the Expo Center and all common areas and common facilities located in the Expo Center.

        Insurance

        The owners of the Casino Resort, the owner of the Mall and the owner of the Expo Center must also maintain minimum types and levels of insurance, including property damage, general liability and business interruption insurance.

        The Cooperation Agreement establishes an insurance trustee to assist in the implementation of the insurance requirements.

        The Cooperation Agreement provides that in the event of a casualty affecting all or part of the Casino Resort, the Expo Center or the Mall, then (a) all insurance proceeds above $1.5 million shall be paid to an insurance trustee to be disbursed in accordance with the provisions of the cooperation agreement and (b) the owners of the affected properties will (subject to certain conditions in the case of the Expo Center) agree to permit such proceeds to be used to restore such property as nearly as reasonably possible to its condition immediately preceding the casualty; provided, however, that no mortgagee of a damaged property shall be required to permit such application of the resulting insurance proceeds unless within 90 days after the casualty (a) the mortgagee receives an opinion from an independent expert to the effect the damaged property may be completed within one year after the delivery of the opinion and (b) the mortgagee receives evidence that the insurance proceeds (together with any other funds committed by the owner) are sufficient to cover the anticipated costs of the restoration (including scheduled debt service payments through the anticipated date of completion of the restorations). If the owner of the affected property is unable to satisfy the foregoing conditions, then the owner’s equitable share of the insurance proceeds shall be applied in accordance with the provisions of its mortgage(s).

        In the event of a condemnation of a part of the Casino Resort, a part of the Mall or a part of the Expo Center, the Cooperation Agreement requires that the affected owner restore the affected property as nearly as reasonably possible to its condition at the time of the partial condemnation less the portion condemned.

        The Cooperation Agreement also requires that insurance proceeds payable in connection with a casualty that is the result of a terrorist act be allocated equitably among the Casino Resort, the Mall and the Expo Center in accordance with the damages suffered by each so long as (a) proceeds in an amount not to exceed the lesser of (i) $105 million, (ii) the cost of restoring the Mall and the rental income lost by the Mall as a result of the terrorist act (and covered by such insurance), and (iii) the total amount of such insurance proceeds, are paid first to the mortgagee of the Mall, and (b) proceeds in an amount not to exceed the lesser of (i) $137 million, (ii) the cost of restoring the Expo Center and the income lost by the Expo Center as a result of the terrorist act (and covered by such insurance, and (iii) the total amount of such insurance proceeds, are paid second to the mortgagee of the Expo Center. The mortgagee of the Mall also has the benefit of $15 million of terrorism coverage that is solely for the benefit of the Mall property.

        Parking

        The Cooperation Agreement also addresses issues relating to the use of the Casino Resort’s parking facilities, the use of parking facilities planned in connection with the Phase II Resort and easements for access. The Casino Resort, the Mall and the Expo Center may use the parking spaces in the Casino Resort’s parking garage on a “first come, first served” basis, as long as each property retains use of sufficient spaces to comply with minimum parking standards. This means that each property uses sufficient spaces to comply with applicable laws to conduct its business. The Casino Resort’s parking garage is owned, maintained, and operated by the Company, with the operating costs allocated among the Company, the Mall and Interface. After the completion of the parking garage planned to be built in connection with the Phase II Resort, the Casino Resort, the Mall and the Expo Center will have the right to use the Phase II Resort parking garage, with the operating costs allocated among each facility. All property owners have granted each other non-exclusive easements and rights to use the roadways and walkways on their properties for vehicular and pedestrian access to the parking garages.

        Utility Easements

        All property owners have also granted each other all appropriate and necessary easement rights to utility lines servicing the Casino Resort, the Phase II Resort and the Expo Center.

        Relations between the Casino Resort and the Phase II Resort

        The Company must approve the plans and specifications (such approval not to be unreasonably withheld) for all portions of the Phase II Resort that will connect with or adjoin the Casino Resort prior to the commencement of construction of the Phase II Resort. The owner of the Phase II Resort must use commercially reasonable efforts to minimize such construction’s interference with the operation of the Casino Resort.

        Additionally, prior to construction of the Phase II Resort, there must be agreement on:

        Coordinated Relations with HVAC Provider

        As discussed under “–HVAC Services Agreement and Related Documents,” the owners of the Casino Resort, the Mall, the Expo Center and the Phase II Resort have or will have separate services agreements with Sempra Energy Solutions (the “HVAC Provider”), the provider of thermal energy.

        The Cooperation Agreement provides mechanisms for these parties to deal with the HVAC Provider in a coordinated manner. In particular, the cooperation agreement establishes conditions for the owner of the Phase II Resort receiving thermal energy services from the HVAC Plant. These conditions include the payment by the owner of the Phase II Resort of all incremental costs attributable to such services and any additional capital improvements required for such services.

        The Cooperation Agreement also provides mechanisms for the owners of the various properties to make decisions regarding the termination or extension of the HVAC services agreements. In general, these provisions permit a property owner that is not receiving adequate HVAC services to replace the HVAC Provider, as long as the property owner:

        Consents, Approvals and Disputes

        If any property owner has a consent or approval right or has discretion to act or refrain from acting, consent or approval will only be granted and action will be taken or not taken only if a commercially reasonable owner would do so and such consent, approval, action or inaction would not have a material adverse effect on the property owned by such property owner. The Cooperation Agreement provides for the appointment of an independent expert to resolve some disputes between the parties, as well as for expedited arbitration for other disputes.

        HVAC Services Agreement and Related Documents

        Sempra Energy Solutions, successor to Atlantic Pacific Las Vegas, LLC, is a California company and is beneficially owned by Sempra Energy, a utility holding company.

        Thermal energy (i.e., heating and air conditioning) is provided to the Casino Resort and the Expo Center by the HVAC Provider using certain heating and air conditioning-related and other equipment (the “HVAC Equipment”). In addition, the HVAC Provider provides the Company with other energy-related services. The central HVAC Plant is located on land owned by the Company, which land and HVAC Plant have been leased to the HVAC Provider for a nominal annual rent. The HVAC Equipment is owned by the HVAC Provider, and the HVAC Provider has been granted appropriate easements and other rights so as to be able to use the HVAC Plant and the HVAC Equipment to supply thermal energy to the Casino Resort and the Expo Center (and, potentially, other buildings), so long as such easements do not materially interfere with the operations of the Casino Resort and the Expo Center. The HVAC Provider paid all costs (“HVAC Costs”) in connection with the purchase and installation of the HVAC Equipment, which costs totaled $70 million. The HVAC Provider has entered into separate service contracts (collectively, the “HVAC Service Agreements”) with: (i) Venetian; (ii) Interface; and (iii) the predecessor to the New Mall Subsidiary, for the provision of heat and cooling requirements at agreed-to rates. The charges payable by all users include a fixed component that enables the HVAC Provider to recover 85% of the HVAC Costs over the initial term of the service contracts, with interest at a fixed annual rate of 7.1%. In addition, the users reimburse the HVAC Provider for the annual cost of operating and maintaining the HVAC Equipment and providing certain other energy related services, and pay the HVAC Provider a management fee of $500,000 per year. Each user is allocated a portion of the total agreed-to charges and fees through its service contract, which portion includes paying 100% of the cost of services in connection with the HVAC Equipment relating solely to such user. Each user is not liable for the obligations of the other users; provided, however, that the New Mall Subsidiary is liable for the obligations of each Mall tenant. The HVAC Service Agreements expire in 2009, at which time the users will have the right, but not the obligation, to collectively either extend the term of their agreements for two consecutive periods of five years each or purchase the HVAC Equipment in accordance with purchase provisions set forth in the HVAC Service Agreements.

        The Company’s rights under the HVAC Service Agreements and related documents were collaterally assigned to The Bank of Nova Scotia, as agent for the lenders under the Company’s senior secured credit facility entered into on June 4, 2002 (the “Senior Secured Credit Facility”) and the holders of the Mortgage Notes as security for its obligations under the Senior Secured Credit Facility and the Mortgage Notes, and the Mall’s rights under the HVAC Services Agreement and related documents were collaterally assigned to Archon Financial, L.P. as lender under the secured mall facility that the Company is a party to (the “Secured Mall Facility”). The HVAC Provider has consented to the Company’s collateral assignment pursuant to a consent and agreement agreed to by the HVAC Provider. Under the HVAC consent and agreement, the HVAC Provider has agreed: (i) to acknowledge that the Company has granted a security interest in its agreements with the HVAC Provider; (ii) under certain conditions, to recognize the Company’s secured lenders’ rights to “step in” to the Company’s rights under these agreements, and to keep from exercising termination and other rights for a time; (iii) not to terminate these agreements or to consent to any termination or suspension of these agreements without written notice to The Bank of Nova Scotia, as agent for the lenders, and providing the Company’s secured lenders an opportunity to correct any default or breach that the Company commits; (iv) under certain conditions, to consent to the transfer of the Company’s interest to any of the secured lenders or a purchaser or grantee at a foreclosure sale and to any purchasers in lieu of foreclosure; and (v) that in the event one or more of the service contracts is rejected in any bankruptcy or insolvency proceedings, to execute and deliver to the secured lenders a new contract that is on the same terms and conditions as the original HVAC Service Agreements.

        Mall Management Contract

        The predecessor to the New Mall Subsidiary has entered into an agreement with Forest City Enterprises (“Forest City”), a subsidiary of Forest City Ratner Enterprises, a leading developer and manager of retail and commercial real estate developments, whereby Forest City manages the Mall and supervises and assists in the creation of an advertising and promotional program and a marketing plan for the Mall. Forest City is also responsible for, among other things, preparation of a detailed plan for the routine operation of the Mall, collection and deposit procedures for rents and other tenant charges, supervision of maintenance and repairs and, on an annual basis, preparation of a detailed budget (including any anticipated nonrecurring expenses and capital expenditures) for the Mall. The term of the management contract is five years from June 19, 1999, the date the Mall opened to the public. Forest City currently receives a management fee of 2% of all gross rents received from the operation of the Mall, provided that Forest City receives a minimum fee of $600,000 per year. Forest City is not affiliated with the Principal Stockholder or any of his affiliates.

Agreements Related to the Macau Casino Construction

        The Company has entered into preliminary contracts in Macau for architectural and engineering services and for site work to construct the Macau Casino. The Company plans to enter into other contracts during 2003 to complete construction of the Macau Casino by February 2004. The Company expects to enter into a construction management agreement during 2003 to facilitate construction of the Macau Casino.

Agreements Relating to the Phase II Resort

        The Casino Resort was developed on a stand-alone basis as the first phase of a planned two-phase development. In the second phase of the development, it is contemplated that the Phase II Subsidiary will construct and develop the Phase II Resort, which also is planned to be a themed resort. In the event that the Phase II Resort is not constructed, the Casino Resort has all the attributes and facilities to continue to operate as a stand-alone resort. See “Item 13 – Certain Relationships and Related Transactions – Possible Conflicts of Interest.”

        Phase II Resort

        The Company has not yet set a date to begin construction of the Phase II Resort. If the Company determines to construct the Phase II Resort, it will be required to raise substantial debt and/or equity financings. Currently, the Company has no commitments to fund the hard construction costs of the Phase II Resort. In addition, the development of the Phase II Resort may require obtaining additional regulatory approvals. The Company’s debt instruments limit its ability to guarantee or otherwise become liable for any indebtedness of the Phase II Subsidiary. These debt instruments also restrict the Company’s and its subsidiaries’ ability to sell or otherwise dispose of the capital stock of the Phase II Subsidiary, including a sale to the Principal Stockholder or to any of his affiliates. In addition, the indenture governing the Mortgage Notes (the “Indenture”) allows the Company to make investments of up to $20.0 million for the development of the Phase II Resort and to incur up to $20.0 million of additional debt to fund such investment.

        Phase II Casino Lease

        If the Phase II Resort is constructed, in order to avoid the need for a separate gaming license for the Phase II Subsidiary, LVSI or Venetian may operate the casino for the Phase II Resort pursuant to a lease (the “Phase II Casino Lease”). The Phase II Casino Lease may have terms substantially similar to the Casino Lease. The Company or Venetian, as the case may be, may agree to operate the casino in the Phase II Resort and the Casino in a substantially similar manner, and the Company or Venetian, as the case may be, may agree to have common gaming and surveillance operations in such casinos (based on pro rata allocations of operating costs).

        Phase II HVAC Services Agreement

        The Cooperation Agreement permits the owner of the land on which the Phase II Resort will be built (the “Phase II Land”) to enter into an HVAC Services Agreement to receive HVAC services from the HVAC Plant. Any such agreement would have to be on terms satisfactory to the HVAC Provider. See “Item 13 – Certain Relationships and Related Transactions – Cooperation Agreement.”

Regulation and Licensing

        State of Nevada

        The ownership and operation of casino gaming facilities in the State of Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the “Nevada Act”) and various local regulations. The Company’s gaming operations are also subject to the licensing and regulatory control of the Nevada Gaming Commission (the “Nevada Commission”), the Nevada Gaming Control Board (the “NGCB”) and the Clark County Liquor and Gaming Licensing Board (the “CCLGLB” and, together with the Nevada Commission and the NGCB, the “Nevada Gaming Authorities”).

        The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record-keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) the establishment of a source of state and local revenues through taxation and licensing fees. Any change in such laws, regulations and procedures could have an adverse effect on the Company’s gaming operations or on the operation of the Casino Resort.

        The Company is required to be licensed by the Nevada Gaming Authorities to operate a casino, and is currently so licensed. The gaming license requires the periodic payment of fees and taxes and is not transferable. The Company was registered by the Nevada Commission as a publicly-traded corporation (“Registered Corporation”) and as such, must periodically submit detailed financial and operating reports to the Nevada Gaming Authorities and furnish any other information that the Nevada Gaming Authorities may require. No person may become a stockholder of, or receive any percentage of profits from, the Company without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company operates the Casino pursuant to the Casino Lease between LVSI and Venetian, which provides for a fixed monthly rental payment. The Company possesses all state and local government registrations, approvals, permits and licenses required in order for the Company to engage in gaming activities at the Casino Resort.

        The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or Venetian to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of the Company must file applications and be licensed by the Nevada Gaming Authorities

        The Nevada Gaming Authorities may deny an application for licensing or a finding of suitability for any cause they deem reasonable. A finding of suitability is comparable to licensing; both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability, or the gaming licensee by whom the applicant is employed or for whom the applicant serves, must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities, and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

        If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or to have an inappropriate relationship with the Company, the Company would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

        The Company is required to submit periodic detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by the Company must be reported to or approved by the Nevada Commission.

        If it were determined that the Nevada Act was violated by the Company, the registration and gaming licenses it then holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Casino Resort and, under certain circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the Casino Resort) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming registration or license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the gaming operations of the Company.

        Any beneficial holder of the Company’s voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have their suitability as a beneficial holder of the Company’s voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

        The Nevada Act requires any person who acquires more than 5% of the Company’s voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of the Company’s voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor” as defined in the Nevada Act, which acquires more than 10% but not more than 15% of the Company’s voting securities, may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities only for investment purposes. An institutional investor shall not be deemed to hold voting securities only for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investment and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company’s corporate charter, bylaws, management, policies or operations of the Company or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company’s voting securities only for investment purposes. Activities that are not deemed to be inconsistent with holding voting securities only for investment purposes include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners.

        Under a provision of the Nevada Act, under certain circumstances, an “institutional investor” as defined in the Nevada Act, which intends to acquire not more than 15% of any class of nonvoting securities of a privately-held corporation, limited partnership or limited liability company that is also a registered holder or intermediary company of the holder of a gaming license, may apply to the Nevada Commission for a waiver of the usual prior licensing or finding of suitability requirements if such institutional investor holds such nonvoting securities only for investment purposes. An institutional investor shall not be deemed to hold nonvoting securities only for investment purposes unless the nonvoting securities were acquired and are held in the ordinary course of business as an institutional investor, do not give the institutional investor management authority, and do not, directly or indirectly, allow the institutional investor to vote for the election or appointment of members of the board of directors, a general partner or manager, cause any change in the articles of organization, operating agreement, other organic document, management, polices or operations, or cause any other action that the Nevada Commission finds to be inconsistent with holding nonvoting securities only for investment purposes. Activities that are not deemed to be inconsistent with holding nonvoting securities only for investment purposes include: (i) nominating any candidate for election or appointment to the entity’s board of directors or equivalent in connection with a debt restructuring; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in the entity’s management, polices or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of nonvoting securities who must be licensed or found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

        Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board may be found to be unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found to be unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company, it: (i) pays that person any dividend or interest upon voting securities of the Company; (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; (iii) pays remuneration in any form to that person for services rendered or otherwise; or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value. Additionally, the CCLGLB has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation holding a gaming license.

        The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file an application, be investigated and be found suitable to own the debt security of such Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

        LVSI is required to maintain a current stock ledger in Nevada that may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. LVSI stock certificates bear a legend indicating that such securities are subject to the Nevada Act.

        Neither LVSI nor Venetian may make a public offering of any securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. The hypothecation of the Company’s assets and restrictions on stock in connection with any public offering also require the prior approval of the Nevada Commission. In addition, the hypothecation of Venetian’s assets and restrictions on stock in respect of any public offering require the approval of the Nevada Commission to remain effective.

        Changes in control of the Company through a merger, consolidation, stock or asset acquisition, management or consulting agreement, or any act or conduct by any person whereby he or she obtains control, shall not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the NGCB and the Nevada Commission concerning a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process of the transaction.

        The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially-adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated.

        The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company’s board of directors in response to a tender offer made directly to the Registered Corporation’s stockholders for the purposes of acquiring control of the Registered Corporation.

        License fees and taxes, computed in various ways depending upon the type of gaming or activity involved, are payable to the State of Nevada and to Clark County, Nevada. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. Also, a casino entertainment tax is paid by the Company to the extent that certain entertainment is provided in a cabaret, nightclub, cocktail lounge or casino showroom in connection with the serving or selling of food, refreshments or merchandise.

        Any person who is licensed, required to be licensed, registered, required to be registered, or under common control with such persons (collectively, “Licensees”), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the NGCB, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of any investigation by the NGCB into their participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Thereafter, Licensees are also required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of any foreign jurisdiction pertaining to such foreign gaming operation, fail to conduct such foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a person in such foreign operation who has been denied a license or a finding of suitability in Nevada on the ground of personal unsuitability.

        The sale of alcoholic beverages by the Company on the premises of the Casino Resort is subject to licensing, control, and regulation by the applicable local authorities. The Company has obtained Clark County gaming and liquor licenses. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such licenses, and any such disciplinary action could (and revocation of such licenses would) have a material adverse effect upon the operations of the Company.

        Macau

        The Company is also subject to licensing and control in other jurisdictions. The Company is constructing a casino in Macau. Venetian Macau is subject to laws, regulations and controls as implemented and administered by the government of Macau. In addition, Venetian Macau is subject to reporting requirements to Macau’s Gambling Inspection and Coordination Bureau on a yearly basis, in particular with respect to the number of gaming tables and electrical or mechanical gaming machines that it intends to operate during the following year.

        Alderney

        During March 2003, a subsidiary of the Company received an interactive gaming license and an electronic betting center license from the Alderney Gambling Control Commission, and is subject to the laws, regulations and controls as implemented and administered by the Government of Alderney.

Employees

        The Company directly employs approximately 4,000 employees in connection with the Casino Resort. The Casino Resort’s employees are not covered by collective bargaining agreements. Most, but not all, major casino resorts situated on the Strip have collective bargaining contracts covering at least some of the labor force at such sites. The unions currently on the Strip include the Local 226 of the Hotel Employees and Restaurant Employees International Union (the “Local”), the Operating Engineers Union and the Teamsters Union. Although no assurances can be given, if employees decide to be represented by labor unions, management does not believe that such representation would have a material impact upon the Company’s results of operations, cash flows or financial position.

        The Local has requested the Company to recognize it as the bargaining agent for employees of the Casino Resort. The Company has declined to do so, believing that current and future employees are entitled to select their own bargaining agent, if any. In the past, when other hotel-casino operators have taken a similar position, the Local has engaged in certain confrontational and obstructive tactics, including contacting potential customers, tenants and investors, objecting to various administrative approvals and picketing. The Local has engaged in such tactics with respect to the Casino Resort and may continue to do so. Although the Company believes it will be able to operate despite such dispute, no assurance can be given that it will be able to do so or that the failure to do so would not result in a material adverse effect on the Company’s results of operations, cash flows or financial position.

Risk Factors

        The following risk factors should be read carefully in connection with evaluating the Company and the forward-looking statements contained in this Annual Report on Form 10-K. Any of the following risks could materially adversely affect the Company, its operating results, its financial condition and the actual outcome of matters as to which forward-looking statements are made in this Annual Report on Form 10-K. Certain statements in “Risk Factors” constitute “forward-looking statements.” Actual results could differ materially from those projected in the forward-looking statements as a result of certain factors and uncertainties set forth below and elsewhere in this Annual Report on Form 10-K. See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Special Note Regarding Forward – Looking Statements.”

        The Company's Substantial Debt Could Impair its Financial Condition

        The Company is highly leveraged and has substantial debt service obligations. As of December 31, 2002, the Company had approximately $1.219 billion of indebtedness outstanding. In addition, there was approximately $75.0 million available for borrowing by Venetian under the $75.0 million senior secured revolving facility (the “Revolving Facility”) of the Senior Secured Credit Facility. The availability under the Revolving Facility may be reduced, eventually to $25.0 million, in the event that borrowings are made under the credit agreement recently entered into by one of the Company’s Macau subsidiaries. The Company’s Macau subsidiaries may also incur substantial indebtedness to construct various projects in Macau. See “Item 8 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 8 – Long-Term Debt.”

        This substantial indebtedness could have important consequences to the Company. For example, it could:

        The Terms of the Company's Debt Instruments May Restrict the Company's Current and Future Operations, Particularly its Ability to Respond to Changes or to Take Some Actions

        The Senior Secured Credit Facility contains, and any future refinancing of this facility likely would contain, a number of restrictive covenants that impose significant operating and financial restrictions on the Company. The credit facility includes covenants restricting, among other things, the Company’s ability to:

        The Indenture also contains numerous covenants including, among other things, restrictions on the Company’s ability and that of its restricted subsidiaries to:

        The Senior Secured Credit Facility also includes financial covenants, including requirements that the Company satisfy:

        In addition, the Company’s other debt and future debt or other contracts could contain financial or other covenants more restrictive than those applicable to the above instruments.

        The Company’s Business is Subject to Significant Contingencies Beyond its Control, Including the Aftermath of Terrorist Acts, Which May Significantly and Adversely Affect its Financial Condition, Results Of Operations or Cash Flows

        The Company’s operations are subject to significant business, economic and regulatory uncertainties and contingencies, many of which are beyond its control. On September 11, 2001, acts of terrorism occurred in New York City, Pennsylvania and Washington D.C. As a result of these terrorist acts, domestic and international travel was severely disrupted. As approximately 48% of the Company’s customers use air travel to come to Las Vegas, these terrorist acts and travel disruptions decreased customer visitation to the Casino Resort. In addition, the war with Iraq could have a similar effect on domestic and international travel. Management cannot predict the extent to which any further terrorist act, outbreak of hostilities or escalation of war, could have a material adverse effect on the economy in general and on the hotel/casino business in particular or could further disrupt air travel, which would adversely affect the Company’s financial condition, results of operations or cash flows. There can be no assurance that the Company will continue to manage the Casino Resort on a profitable basis or that it will be able to attract a sufficient number of guests, gaming customers and other visitors to the Casino Resort to make its various operations profitable independently or as a whole.

        The Company Faces Significant Competition Which Could Materially Adversely Affect its FinancialCondition, Results of Operations or Cash Flows

        The hotel, resort and casino businesses are highly competitive. See “–Business – Competition.” The Casino Resort competes with a large number of major hotel-casinos and a number of smaller casinos located on and near the Strip and in and near Las Vegas, including other upscale destinations such as The Bellagio, Mandalay Bay and Paris. Management expects competition to increase with the construction that began in November 2002 of Le Reve, an approximately 2,500-room resort being built on the site of the former Desert Inn, one block north of the Casino Resort, on the corner of Las Vegas Boulevard and Sands Avenue (anticipated to open in April 2005) and the opening during January 2003 of an approximately 1.8 million square foot convention center at Mandalay Bay. The Company also competes, to some extent, with other hotel-casino facilities in Nevada and in Atlantic City, as well as hotel-casinos and other resort facilities and vacation destinations elsewhere in the United States and around the world. Many of the Company’s competitors are subsidiaries or divisions of large public companies and may have greater financial and other resources than the Company has.

        The Company also competes with legalized gaming from casinos located on Native American tribal lands. In March 2000, California voters approved an amendment to the California Constitution permitting Native American tribes in California to operate a limited number of slot and video poker machines and house-banked card games. The governor of California has entered into compacts with numerous tribes in California. The federal government has approved approximately 60 such compacts, and casino-style gaming is now legal on those tribal lands. While the competitive impact on the Company’s operations in Las Vegas from the continued growth of Native American gaming establishments in California remains uncertain, the proliferation of gaming in California and other areas located near the Casino Resort could have an adverse effect on the Company’s results of operations.

        In addition, certain states have legalized, and others may legalize, casino gaming in specific areas, including metropolitan areas from which the Company traditionally attracts customers, such as New York, Los Angeles, San Francisco and Boston. In October 2001, the New York legislature approved a bill for expanded casino gaming on Native American reservations in the State of New York. Such proliferation of gaming venues, by luring customers close to home and away from Las Vegas, could adversely affect the Company’s financial condition, results of operations or cash flows.

        Competition will be increasing for the Congress Center and the Expo Center as a result of certain planned additional convention and meeting facilities as well as the enhancement or expansion of existing convention and meeting facilities in Las Vegas, which could have a negative impact on the Company’s business. With the expansion of their facilities, the Las Vegas Convention Center, a 3.2 million square foot convention and exhibition space facility, and the Mandalay Bay Convention Center, an approximately 1.8 million square foot convention center that opened in January 2003, will continue to be a major competitor of the Expo Center and will be able to solely host many large trade shows which had previously split space between the Las Vegas Convention Center and the Expo Center. In addition, management anticipates increased competition from the MGM Grand Hotel and Casino and the Mirage, which have significant conference and meeting facilities. To the extent that these competitors are able to capture a substantially larger portion of the trade show and convention business in Las Vegas, there could be a material adverse impact on the Congress Center and on the Expo Center and in turn, the Company’s financial position, results of operations and cash flows, given the Casino Resort’s link to the Expo Center. Other cities such as Boston, Orlando and Pittsburgh are also in the process of developing, or have announced plans to develop, convention centers and other meeting, trade and exhibition facilities that could in the long term materially adversely affect the Company.

        The Company is Involved in a Lawsuit with the Construction Manager Regarding the Original Construction of The Casino Resort, Which, if Decided Adversely to the Company, Could Have a Material Adverse Impact on the Company’s Financial Condition, Results of Operations or Cash Flows

        The original construction of the principal components of the Casino Resort was undertaken by Lehrer McGovern Bovis, Inc. as construction manager under a construction management agreement. The construction management agreement established a guaranteed maximum price of $645.0 million, subject to various exceptions, and a required substantial completion date for the Casino Resort of April 21, 1999. In July 1999, the Company filed a lawsuit in federal court against the construction manager for the Casino Resort, the guarantor of the construction manager’s obligations and various other parties for breach of contract and breach of guaranty, including failure to pay trade contractors and vendors and failure to meet the April 21, 1999 substantial completion date for the Casino Resort. The Company is seeking total damages in excess of $100.0 million. In response, the construction manager has filed a complaint against the Company for breach of contract and quantum meruit and also alleging that the Company defrauded the construction manager in connection with the construction of the Casino Resort. The construction manager is seeking damages, attorney’s fees, costs and punitive damages and claims that it is owed approximately $90.0 million from the Company.

        In connection with these disputes, the construction manager and its subcontractors filed mechanics liens against the Casino Resort for approximately $145.6 million and $182.2 million, respectively. The Company then purchased surety bonds for all of the claims underlying these liens other than approximately $15.0 million of claims with respect to which the construction manager purchased bonds. As a result, there can be no foreclosure of the Casino Resort in connection with the claims of the construction manager and its subcontractors. However, the Company will be required to pay or immediately reimburse the bonding company if, and to the extent that, the underlying claims are judicially determined to be valid.

        The Company and the construction manager commenced a trial in state court in Clark County, Nevada to litigate certain of their respective claims in August 2002. Many of the remaining claims that are the subject of the state court action and the federal court action have been proceeding concurrently in independent arbitration hearings. It is not yet possible to determine the ultimate outcome of this litigation, including the likelihood of loss or a range of loss amounts. Although the Company has purchased an insurance policy for loss coverage for a portion of certain specified potential losses, if this litigation or other proceedings concerning the claims of the construction manager or its subcontractors were decided adversely to the Company and were not covered by the insurance policy, this litigation or other proceedings could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

        There are Significant Risks Associated with the Company’s Planned Construction Projects, Which Could Adversely Affect its Financial Condition, Results of Operations or Cash Flows

        The Company’s on-going and future construction projects, such as the Phase IA Addition and Macau Casino, entail significant risks. Construction activity requires the Company to obtain qualified subcontractors, the availability of which may be uncertain. Contractual projects are subject to overrun and delays not within the Company’s control or the subcontractors’ control such as shortages of materials or skilled labor, unforeseen engineering, environmental and/or geological problems, work stoppages, weather interference, unanticipated cost increases and unavailability of construction equipment. Construction, equipment or staffing problems or difficulties in obtaining any of the requisite licenses, permits, allocations and authorizations from governmental or regulatory authorities could increase the total cost, delay, jeopardize or prevent the construction or opening of such projects or otherwise affect the design and features of the Phase IA Addition, the Macau Casino or other projects or the Company’s ability to preempt its competition.

        The anticipated costs and completion date for the Phase IA Addition and Macau Casino are based on budgets, conceptual design documents and schedule estimates that the Company has prepared with the assistance of architects and are subject to change as the design documents are finalized and more actual construction work is performed. If the Company incurs significant cost overruns that are not covered by trade contractors or insurance, it may not be able to arrange for additional financing to pay for such costs. A failure to complete the Phase IA Addition or the Macau Casino on budget and on schedule may adversely affect the Company’s financial condition, results of operations or cash flows.

        In addition, the construction of the Phase IA Addition is being funded in part by the lenders under the Senior Secured Credit Facility. Pursuant to such credit facility, the Company may obtain loan proceeds only upon satisfaction of certain conditions precedent, some of which are subject to the discretion of the lenders. The Company cannot assure you that the Company will be able to satisfy such conditions precedent to the satisfaction of such lenders or that, even it does satisfy such conditions, such lenders will perform their obligations under the facility and fund the loans. If the Company is unable to obtain loan proceeds under the credit facility, management cannot provide assurance that the Company will have access to other funds as may be required to complete the Phase IA Addition. The failure to obtain the loan proceeds or such other funds to complete the Phase IA Addition could materially and adversely affect the Company’s financial condition, results of operation and cash flows.

        The Company May Not Be Able to Raise the Required Funds for the Macau Casino

        The anticipated cost of the Macau Casino is $210.0 million. Venetian Macau must obtain these funds in order to complete the Macau Casino by its scheduled completion date of February 2004. These funds will consist of (i) a $40.0 million cash investment from the Company (ii) $50 million in proceeds from a credit agreement recently entered into by one of the Company’s Macau subsidiaries (which loan will be guaranteed by the Company and Venetian) and (iii) approximately $120 million from a Venetian Macau debt financing to occur in the future. Although Venetian Macau is engaged in discussions, there can be no assurance that the remaining $120 million of financing will be available to Venetian Macau to complete the Macau Casino, and, if available, that the financing will be on terms favorable to Venetian Macau.

        The Loss of the Company’s Gaming License or its Failure to Comply with the Extensive Regulations that Govern its Operations Could Have a Material Adverse Effect on its Financial Condition, Results of Operations or Cash Flows

        The Company’s gaming operations and the ownership of its securities are subject to extensive regulation by the Nevada Gaming Commission, the Nevada State Gaming Control Board and the Clark County Liquor and Gaming Licensing Board. These gaming authorities have broad authority with respect to licensing and registration of the Company’s business entities and individuals involved with the Company.

        Although the Company currently holds a gaming license issued by the Nevada gaming authorities, these authorities may, among other things, revoke the gaming license of any corporate entity or the registration of a registered corporation or any entity registered as a holding company of a corporate licensee for violations of gaming regulations. In addition, the Nevada gaming authorities may, under certain conditions, revoke the license or finding of suitability of any officer, director, controlling person, shareholder, noteholder or key employee of a licensed or registered entity. If the Company’s gaming licenses were revoked for any reason, the Nevada gaming authorities could require the closing of the casino, which would have a material adverse effect on the Company’s business.

        From time to time, the Nevada State Gaming Control Board investigates or reviews the records of gaming companies for compliance with gaming regulations as part of its regular oversight functions. The Company has been and is being investigated and a number of violations have been alleged, which may result in a penalty or penalties. A majority of these incidents occurred in the first year of the Company’s operations. The Company does not believe that these violations will result in a material adverse effect on its business or operations.

        In addition, any future public offering of debt or equity securities by the Company, including the hypothecation of its assets, requires the prior approval of the Nevada Gaming Commission if the Company intends to use the securities or the proceeds from the sale thereof to pay for construction of, or to acquire an interest in, any gaming facilities in Nevada, to finance the gaming operations of an affiliated company or to retire or extend obligations incurred for any such purpose.

        The Company and/or its subsidiaries are also subject to licensing and control in other jurisdictions. The Company is constructing a casino in Macau. Venetian Macau is subject to regulations and controls as implemented and administered by the government of Macau. A subsidiary of the Company has received a license to operate an Internet gaming site in Alderney and is subject to the Internet gaming regulations and controls of the government of Alderney. The termination of the Macau concession or the Alderney licenses could have an adverse effect on the Company.

        Certain Nevada Gaming Laws Apply to the Company's Planned Gaming Activities and Associations in Macau and Alderney

        Certain Nevada gaming laws also apply to the Company’s gaming activities and associations in jurisdictions outside the state of Nevada. The Company is required to comply with certain reporting requirements concerning its proposed gaming activities and associations occurring outside the state of Nevada, including Macau and Alderney. The Company is also subject to disciplinary action by the Nevada Gaming Commission if it:

        In addition, if the Nevada State Gaming Control Board determines that one of the Company’s actual or intended activities or associations in a foreign gaming operation may violate one or more of the foregoing, the Company can be required by it to file an application with the Nevada Gaming Commission for a finding of suitability of such activity or association. If the Nevada Gaming Commission finds that the activity or association in the foreign gaming operation is unsuitable or prohibited, the Company will either be required to terminate the activity or association, or will be prohibited from undertaking the activity or association. Consequently, should the Nevada Gaming Commission find that the Company’s gaming activities or associations in Macau or Alderney are unsuitable, the Company may be prohibited from undertaking its planned gaming activities or associations in those jurisdictions.

        The Company Depends on the Continued Services of Key Managers and Employees. If the Company Does Not Retain its Key Personnel, Attract, and Retain Other Highly Skilled Employees, its Business Will Suffer

        The Company’s ability to maintain its competitive position is dependent to a large degree on the services of its senior management team, including Sheldon G. Adelson, the Principal Stockholder. Only William Weidner, Bradley Stone and Robert Goldstein have employment agreements. The employment agreements do not require them to stay with the Company. The Company cannot assure you that any of these individuals will remain with the Company. The Company currently does not have a life insurance policy on any of the members of the senior management team. The death or loss of the services of any of the senior managers or the inability to attract and retain additional senior management personnel could have a material adverse effect on the Company’s business.

        The Company's Business, Policies, Affairs, and all Major Corporate Decisions are Controlled by the Principal Stockholder

        Mr. Adelson beneficially owns approximately 95% of the Company’s outstanding common stock. The Company’s board of directors is comprised of two persons, one of whom is Mr. Adelson. Mr. Adelson has two votes for all matters before the board of directors, whereas the other board member has only one vote. As a result, Mr. Adelson controls the Company’s business, policies and affairs, including the election of directors and all major corporate transactions and could prevent a change of control.

        Mr. Adelson owns Interface, the owner of the Expo Center, which may result in potential conflicts of interest. The Exp. Center, on the one hand, and the Congress Center and the meeting and conference space that is a part of the Phase IA Addition, on the other hand, are potential competitors in the business conference and meetings business. Under the Cooperation Agreement, the Company has agreed that, except under certain circumstances with respect to the Phase IA Addition, it will not conduct, or permit to be conducted at the Casino Resort, trade shows or expositions of the type generally held at the Expo Center. Furthermore, marketing practices that are intended to benefit the Expo Center may have a detrimental effect on the Casino Resort.

        The Construction of the Phase II Resort and Phase IA Addition Could Have an Adverse Effect on the Casino Resort

        The Company is currently in the process of constructing the Phase IA Addition on top of the Casino Resort’s existing parking garage and on land adjacent to it. In addition, through the Company’s subsidiary, Lido Casino Resort, LLC, the Company is planning to construct the Phase II Resort, which would consist of a hotel, casino, restaurant, dining and entertainment complex, and meeting and conference center space on a 15-acre site adjacent to the Casino Resort. Although the Company intends to construct the Phase IA Addition and the Phase II Resort with minimal impact on the Casino Resort, the Company cannot guaranty that the construction will not disrupt the operations of the Casino Resort or that it will be implemented as planned. Therefore, the construction of the Phase IA Addition and the Phase II Resort may adversely impact the businesses, operations and revenues of the Casino Resort.

        The Common Ownership and Management of the Casino Resort and the Phase II Resort Could Have an Adverse Effect on the Casino Resort

        The common ownership of the Casino Resort and the Phase II Resort may result in potential conflicts of interest because the Phase II Resort will be a potential competitor to the Casino Resort. For example, the Company may offer discounts and other incentives for visitors to stay at the Phase II Resort, which might result in a competitive advantage of the Phase II Resort over the Casino Resort. In addition, the Company may also choose to allocate certain business opportunities, such as potential restaurant, dining and entertainment tenants or requests for room reservations, to the Phase II Resort instead of the Casino Resort. Although common ownership of both the Casino Resort and the Phase II Resort may result in economies of scale, efficiencies and joint business opportunities for the two resorts, the Casino Resort may, in certain circumstances, bear the greater burden of the expenses that are shared by both resorts. In addition, the Company expects to lease and operate the casino for the Phase II Resort, so that management’s time may be split between overseeing the operation of each resort. In certain circumstances, management may devote more time to the ownership and operations responsibilities of the Phase II Resort than those of the Casino Resort.

        The Company May Be Adversely Affected by Union Activities in Las Vegas

        Although the Company’s employees are not covered by collective bargaining agreements, most major casino resorts situated on the Strip have collective bargaining agreements with unions such as the Local 226 of the Hotel Employees and Restaurant Employees International Union. Although the Company does not expect a strike to impact its work force or operations directly, no assurance can be given that a strike would not adversely affect Las Vegas business and visitation levels generally by generating negative publicity. As a result, the Company’s business may be adversely affected if such a strike were to occur.

        Entering into New Ventures Involves Business and Financial Risks, Including Litigation Risks and the Risk of Loss of the Nevada Gaming Licenses

        The Company is assessing the possibility of developing and operating an Internet gaming site and is currently exploring other business opportunities for expansion, including Native American gaming and the possibility of operating casino resorts in certain foreign jurisdictions. It is unclear how long it would take, or if it would be feasible or attractive, for the Company to develop, operate, obtain the necessary regulatory approvals for, acquire land in connection with or take any of the other necessary business risks and measures to complete any of these ventures. If the Company is successful in launching any such ventures, if at all, the Company cannot assure you that any of these projects would be successful, or that they would not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

        The Company is currently in the process of constructing a casino in Macau and is developing plans to develop and operate one or more hotel, additional casinos and convention centers in Macau, People’s Republic of China. The Company’s Macau development and construction is subject to significant political, economic and social risks inherent in doing business in an emerging market such as China. Although Venetian Macau has been granted the right to operate casinos in Macau, the Company cannot assure you that the construction and operation of the Macau Casino will be successful, that the Company will be able to continue to acquire permanent and temporary operating sites on acceptable terms or at all for future planned development, or that such right will not be revoked. In particular, some of the risks involved in the development and licensing process include:

        The Company believes that future regulatory developments in China will not unduly limit its planned investment. However, the Company cannot assure you at this time that all its planned activities in Macau will be permitted or economically feasible. Therefore, the planned investments in China could be jeopardized.

        The Company’s Insurance Coverage May Not Be Adequate to Cover all Possible Losses that the Casino Resort Could Suffer. In Addition, the Company’s Insurance Costs May Increase and the Company May Not Be Able to Obtain the Same Insurance Coverage in the Future

        The Company is dependent on the operations of the Casino Resort, which occupies a single site. The September 11th terrorist attacks have substantially affected the availability of insurance coverage for certain types of damages or occurrences. In addition, insurance premiums have increased on available coverage. It is possible that the war with Iraq could further adversely affect available insurance coverage and result in increased premiums on available coverage. The Company renewed its property and casualty insurance policies in April 2002. The Company was not able to purchase new insurance policies or renew its existing policies on terms as favorable as the terms of its prior policies. The costs of the new insurance policies are higher as a result of the general increase in premium levels. The new insurance policies exclude from coverage certain losses and damages that were covered under the Company’s prior insurance policies. In particular, the Company has substantially reduced insurance coverage with respect to occurrences of terrorist acts and any losses that could result from these acts.

        If there is an act of terrorism that affects the Casino Resort, the Mall and/or the Expo Center, there may not be sufficient insurance proceeds to cover the costs of restoring the property. Therefore, the Company could be exposed to heavy losses in the event that any damages occur, directly or indirectly, as a result of terrorist acts.

        In addition to the damage caused to the Company’s property by a casualty loss (such as fire, natural disasters, acts of war or terrorism), the Company may suffer disruption of its business in such event or be subject to claims by third parties injured or harmed. While the Company carries business interruption insurance and general liability insurance, such insurance may not be adequate to cover all losses in such event.

        The Company’s current insurance policies terminate in April 2003 and cost an additional $2.7 million per year as compared to the previous year 2002 policies. In addition to these policies, the Company has obtained $257.0 million of terrorism insurance coverage should a terrorist event occur, whereby up to $137.0 million of losses on the Expo Center and $120.0 million of losses on the Mall would take priority under the policy. In particular, the Company cannot be assured that losses incurred by the Casino Resort would be covered by the existing terrorism insurance coverage or that it will be able to continue to obtain insurance coverage with respect to occurrences of terrorist acts and any losses that could result from these acts. This could expose the Company to heavy losses in the event that any damages occur, directly or indirectly, as a result of terrorist acts. The cost of coverage may become so high that the Company may need to reduce its policy limits or agree to certain exclusions from its coverage.

ITEM 2. —PROPERTIES

        The Casino Resort sits on an approximately 30-acre parcel of land owned by the Company. The Phase II Subsidiary owns an additional approximately 15-acre adjacent parcel on which the conference center for the Phase IA Addition is being constructed and the Phase II Resort is planned to be constructed.

        The Senior Secured Credit Facility is, subject to certain exceptions, secured by a first priority security interest (subject to permitted liens) in the real property owned by the Company, including, the 30 acre parcel of land under the Casino Resort, the improvements thereon, and the Phase IA Addition (including the airspace in which the conference center for the Phase IA Addition is planned to be constructed). Subject to limited exceptions, the Mortgage Notes are also secured on a second-lien basis (subject to permitted liens) by these assets. The Secured Mall Facility is secured by first priority security interests in all of the assets of the New Mall Subsidiary, other than the capital stock and other equity interests of the New Mall subsidiary.

ITEM 3. —LEGAL PROCEEDINGS

        Except as described below the Company is party to various legal matters and claims arising in the ordinary course of business. The Company does not expect that the final resolution of these matters will have a material adverse impact on the financial position, results of operations or cash flows of the Company.

        Construction Litigation

        The construction of the principal components of the Casino Resort was undertaken by Lehrer McGovern Bovis, Inc. (the “Construction Manager”) pursuant to a construction management agreement and certain amendments thereto (as so amended, the “Construction Management Contract”). The Construction Management Contract established a final guaranteed maximum price (the “Final GMP”) of $645.0 million, so that, subject to certain exceptions (including an exception for cost overruns due to “scope changes”), the Construction Manager was responsible for any costs of the work covered by the Construction Management Contract in excess of $645.0 million. The Construction Management Contract also established a required “substantial completion” date (the date on which the construction of the Casino Resort was sufficiently complete, including the receipt of necessary permits, licenses and approvals, so that all components of the Casino Resort could be open to the general public) of April 21, 1999 (subject to extensions on account of “scope changes” and force majeure events), with a per-day liquidated damages penalty for failure to meet such deadline.

        The Company paid the Construction Manager a construction management fee of 1½% of the Final GMP, payable in monthly installments.

        The obligations of the Construction Manager under the Construction Management Contract were guaranteed by Bovis, Inc. (“Bovis”), the Construction Manager’s direct parent at the time the Construction Management Contract was entered into (such guaranty, the “Bovis Guaranty”). Bovis’ obligations under the Bovis Guaranty were guaranteed by The Peninsula and Oriental Steam Navigation Company (“P&O”), a British public company and the Construction Manager’s ultimate parent at the time the Construction Management Contract was entered into (such guaranty, the “P&O Guaranty”).

        The Construction Manager obtained, on behalf of the Company (and at the Company’s expense), a liquidated damages insurance policy (the “LD Policy”). The LD Policy covers (with certain exceptions) liquidated damages for delays of not less than one month and not more than four months in achieving substantial completion beyond the date substantial completion was required to be achieved under the Construction Management Contract.

        On July 30, 1999, Venetian filed a complaint against the Construction Manager and Bovis in United States District Court for the District of Nevada. The action alleges breach of contract by the Construction Manager of its obligations under the Construction Management Contract and a breach of contract by Bovis of its obligations under the Bovis Guaranty, including failure to fully pay trade contractors and vendors and failure to meet the April 21, 1999 guaranteed completion date. The Company amended this complaint on November 23, 1999 to add P&O as an additional defendant. The suit is intended to ask the courts, among other remedies, to require the Construction Manager and its guarantors to pay its contractors, to compensate Venetian for the Construction Manager’s failure to perform its duties under the Construction Management Contract and to pay the Company the agreed upon liquidated damages penalty for failure to meet the guaranteed substantial completion date. Venetian seeks total damages in excess of $100.0 million. The Construction Manager subsequently filed motions to dismiss the Company’s complaint on various grounds, which the Company opposed. The Construction Manager’s motions were either denied by the court or voluntarily withdrawn.

        In response to Venetian’s breach of contract claims against the Construction Manager, Bovis and P&O, the Construction Manager filed a complaint on August 3, 1999 against Venetian in the District Court of Clark County, Nevada. The action alleges a breach of contract and quantum meruit claims under the Construction Management Contract and also alleges that Venetian defrauded the Construction Manager in connection with the construction of the Casino Resort. The Construction Manager seeks damages, attorney’s fees and costs and punitive damages. In the lawsuit, the Construction Manager claims that it is owed approximately $90.0 million from Venetian and its affiliates. This complaint was subsequently amended by the Construction Manager, which also filed an additional complaint against the Company relating to work done and funds advanced with respect to the contemplated development of the Phase II Resort. Based upon its review of the complaints, the Company believes that the Construction Manager has not provided Venetian with reasonable documentation to support such claims, the Construction Manager has materially breached its agreements with the Company and the Construction Manager’s claims are without merit. The Company intends to vigorously defend itself and pursue its claims against the Construction Manager in any litigation.

        In connection with these disputes, as of December 31, 1999 the Construction Manager and its subcontractors filed mechanics liens against the Casino Resort for $145.6 million and $182.2 million, respectively. The Company believes that a major reason these lien amounts exceed the Construction Manager’s claims of $90.0 million is based upon a duplication of liens through the inclusion of lower-tier claims by subcontractors in the liens of higher-tier contractors, including the lien of the Construction Manager. As of December 31, 1999, the Company had purchased surety bonds for virtually all of the claims underlying these liens (other than approximately $15.0 million of claims with respect to which the Construction Manager purchased bonds). As a result, there can be no foreclosure of the Casino Resort in connection with the claims of the Construction Manager and its subcontractors. However, the Company will be required to pay or immediately reimburse the bonding company if and to the extent that the underlying claims are judicially determined to be valid. If such claims are not settled, it is likely to take a significant amount of time for their validity to be judicially determined.

        The Company believes that these claims are, in general, unsubstantiated, without merit, overstated, and/or duplicative. The Construction Manager itself has publicly acknowledged that at least some of the claims of its subcontractors are without merit. In addition, the Company believes that pursuant to the Construction Management Contract and the Final GMP, the Construction Manager is responsible for payment of any subcontractors’ claims to the extent they are determined to be valid. The Company may also have a variety of other defenses to the liens that have been filed, including, for example, the fact that the Construction Manager and its subcontractors previously waived or released their rights to file liens against the Casino Resort. The Company intends to vigorously defend itself in any lien proceedings.

        On August 9, 1999, the Company notified the insurance companies providing coverage under the LD Policy that it has a claim under the LD Policy. The LD Policy provides insurance coverage for the failure of the Construction Manager to achieve substantial completion of the portions of the Casino Resort covered by the Construction Management Contract within 30 days of the April 21, 1999 deadline, with a maximum liability under the LD Policy of approximately $24.1 million and with coverage being provided, on a per-day basis, for days 31-120 of the delay in the achievement of substantial completion. Because the Company believes that substantial completion was not achieved until November 12, 1999, the Company’s claim under the LD Policy is likely to be for the above-described maximum liability of $24.1 million. The Company expects the LD Policy insurers to assert many of the same claims and defenses that the Construction Manager has asserted or will assert in the above-described litigations. Liability under the LD Policy may ultimately be determined by binding arbitration.

        In June 2000, the Company purchased an insurance policy (the “Insurance Policy”) for loss coverage in connection with all litigation relating to the construction of the Casino Resort (the “Construction Litigation”). Under the Insurance Policy, the Company will self-insure the first $45.0 million and the insurer will insure up to the next $80.0 million of any possible covered losses. The Insurance Policy provides coverage for any amounts determined in the Construction Litigation to be owed to the Construction Manager or its subcontractors relating to claimed delays, inefficiencies, disruptions, lack of productivity/unauthorized overtime or schedule impact, allegedly caused by the Company during construction of the Casino Resort, as well as any defense costs.

        The Company and the Construction Manager commenced a trial in state court in Clark County, Nevada to litigate certain of their respective claims in August 2002. Many of the remaining claims between the parties that are the subject of the state court action and the federal court action will be proceeding concurrently in independent arbitration hearings.

        All of the pending litigation described above is in preliminary stages and it is not yet possible to determine a range of loss or its ultimate outcome. If any litigation or other lien proceedings concerning the claims of the Construction Manager or its subcontractors were decided adversely to the Company, such litigation or other lien proceedings could have a material adverse effect on the financial position, results of operations or cash flows of the Company, to the extent such litigation or lien proceedings are not covered by the Insurance Policy.

ITEM 4. —SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.

PART II

ITEM 5.—MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

        There is no established trading market for the common stock of LVSI and the Company is not aware of any bid quotations for the common stock of LVSI.

Holders

        As of March 31, 2003, there were five holders of record of the common stock of LVSI.

Dividends

        LVSI did not pay any dividends in 2001 or 2002. The Company’s current long-term debt arrangements generally prohibit or restrict the payment of cash dividends. See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and “Item 8 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 8 – Long-Term Debt.”

ITEM 6. —SELECTED FINANCIAL DATA

        The historical selected financial data set forth below should be read in conjunction with “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 2002, 2001 and 2000, and the balance sheet data at December 31, 2002 and 2001 are derived from, and are qualified by reference to, the audited financial statements included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 1999 and 1998 and the balance sheet data at December 31, 2000, 1999 and 1998 are derived from the Company’s audited financial statements that do not appear herein. The historical results are not necessarily indicative of the results of operations to be expected in the future.

ITEM 7.—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “–Special Note Regarding Forward – Looking Statements.”

General

        The Company owns and operates the Casino Resort, a large-scale Renaissance Venice-themed hotel, casino, retail, meeting and entertainment complex in Las Vegas, Nevada. The Casino Resort includes the only all-suites hotel on the Las Vegas Strip with 3,036 suites; a gaming facility of approximately 116,000 square feet; an enclosed retail, dining and entertainment complex of approximately 446,000 gross leasable square feet; and a meeting and conference facility of approximately 500,000 square feet of convention space. The Company is party to litigation matters and claims related to its operations and construction of the Casino Resort that could have a material adverse effect on the financial position, results of operations or cash flows of the Company to the extent such litigation is not covered by the Insurance Policy. See “Item 3 – Legal Proceedings.”

        During the first two quarters of 2002, the Company’s operating results were negatively impacted by a decline in tourism following the terrorist attacks of September 11, 2001 and an economic downturn. Despite the decline in tourism and economic downturn early in 2002, several of the Company’s financial indicators improved in the last two quarters of 2002 due in large part to: (1) forward hotel room and meeting space bookings from conventions and trade shows at the Casino Resort; (2) increased room occupancies; (3) a recurring revenue stream from the Mall; and (4) successful cost-cutting initiatives. Although the Company expects its results to continue to compare favorably with the first and second quarters of 2002, the extent to which decreased tourism and an economic downturn will directly or indirectly impact operating results in the future cannot be predicted, nor can the Company predict the extent to which future security alerts and/or additional terrorist attacks may impact operations. In particular, the war with Iraq could have a material adverse impact on the Company’s business if it disrupts domestic and international air travel to Las Vegas.

        In June 2002, the Company entered into the Senior Secured Credit Facility and issued $850 million of Mortgage Notes and used the proceeds to repurchase or redeem all its remaining 12¼% Mortgage Notes due 2004 (the “Old Mortgage Notes”) and its 14¼% Senior Subordinated Notes due 2005 (the “Old Subordinated Notes” and, together with the Old Mortgage Notes, the “Old Notes”) and to repay all of its other outstanding indebtedness, (collectively, the “Refinancing Transactions”). See “–Liquidity and Capital Resources Refinancing Transactions.” In connection with the Refinancing Transactions, the Company incurred a loss on early retirement of indebtedness of $51.4 million during the fiscal year ended December 31, 2002 which was comprised of $33.0 million of call premiums paid in connection with the Refinancing Transactions and the write-off of $18.4 million related to the write-off of unamortized debt offering costs and unamortized original issue discount.

        During June 2002, the Company re-commenced construction of the Phase IA Addition consisting of 1,000 additional hotel rooms, 150,000 square feet of meeting space and a 1,000 parking space addition to the existing parking garage. Due to the travel disruption to Las Vegas during the fourth quarter of 2001, the Company decided to suspend construction of the Phase IA Addition at that time. The Company currently anticipates that the Phase IA Addition construction will be completed and the new facilities will be open for business in June 2003 with a remaining cost to complete of approximately $149.0 million plus, $8.9 million to expand the HVAC Plant (the “HVAC Plant Expansion”) to accommodate the Phase IA Addition, as of December 31, 2002. Due to the inherent risks in large construction projects, however, there can be no assurance that the Phase IA Addition or the HVAC Plant Expansion will be constructed without any substantial delays or cost increases. See “Item 1 – Business – Risk Factors – There are Significant Risks Associated with the Company’s Planned Construction Projects, Which Could Adversely Affect its Financial Condition, Results of Operations or Cash Flows.”

        On June 26, 2002, the Company announced that a joint venture comprised of Venetian Macau and a group of Macau and Hong Kong-based investors had entered into a final concession contract with the Government of the Macau Special Administrative Region of the People’s Republic of China to operate casinos in Macau. Venetian Macau entered into the final terms of a joint venture, sub-concession, and management agreements in the fourth quarter of 2002. The final terms of the joint venture and sub-concession agreements include financial obligations to the Government of Macau. The company commenced construction of the Macau Casino during December 2002. The Company currently anticipates that the Macau Casino construction will be completed and open for business in February 2004 with a total cost to complete of $210.0 million. Through December 31, 2002, the Company had incurred pre-developmental expenses of $5.9 million and Macau Casino capital expenditure costs of $2.4 million in connection with the Macau project. See “–Liquidity and Capital Resources — Macau Joint Venture” and “Item 1 – Business – Risk Factors – The Company May Not Be Able to Raise the Required Funds for the Macau Casino.”

        The Company has also entered into a joint venture agreement to assess the feasibility of and develop an Internet gaming site. The Company received an interactive gaming license and an electronic betting center license by the Alderney Gambling Control Commission during March 2003, but has not yet established any operations. Through December 31, 2002, the Company has contributed $0.4 million to the joint venture. The Company estimates that it is committed to contribute approximately $1.0 million, approximately one-third of the anticipated capital cost, to the joint venture during the next year. After recovery of each partner’s initial capital contribution, the Company will receive 50% to 80% of the net profit of the joint venture, based upon an increasing scale of net profit (if any). The joint venture provides that the agreement will be automatically terminated should the Company fail to obtain any additional required regulatory approvals from the government of Alderney, the Nevada gaming authorities, or any other applicable jurisdiction prior to launching its operations.

Critical Accounting Policies and Estimates

        Management has identified the following critical accounting policies that affect the Company’s more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements. The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates those estimates, including those related to asset impairment, accruals for slot marketing points, self-insurance, compensation and related benefits, revenue recognition, allowance for doubtful accounts, contingencies and litigation. The Company states these accounting policies in the notes to the consolidated financial statements and in relevant sections in this discussion and analysis. These estimates are based on the information that is currently available to the Company and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could vary from those estimates.

        The Company believes that the following critical accounting policies affect significant judgments and estimates used in the preparation of its consolidated financial statements:

Year Ended December 31, 2002 compared to the Year Ended December 31, 2001

        Operating Revenues

        Consolidated net revenues for the year ended December 31, 2002 were $571.7 million, representing an increase of $47.8 million when compared with $523.9 million of consolidated net revenues during 2001. The increase in net revenues was due to: (1) an increase of casino revenue of $29.3 million primarily the result of increased table games win percentage; (2) an increase in rooms revenue of $2.5 million as the result of higher hotel room occupancy; and (3) an increase in food and beverage revenue of $8.3 million which resulted from higher room occupancy and increased banquet revenues, all of which was partially offset by a decrease in other revenues of $0.6 million as the result of reduced group cancellation fees.

        Casino revenues were $256.5 million in the year ended December 31, 2002, an increase of $29.3 million from 2001. The increase was attributable to several factors, including: (1) higher table games win percentage (calculated before discounts) of 21.4% during 2002 as compared to 15.3% during 2001 (the table games win percentage is reasonably predictable over time, but may vary considerably during shorter periods); and (2) offset by more stringent table games marketing parameters during 2002 that resulted in decreased table games volume. Table games drop (volume) decreased to $867.3 million in the year ended December 31, 2002 from $966.6 million during 2001. Slot handle (volume) in the year ended December 31, 2002 decreased to $1.658 billion from $1.825 billion reported during 2001 because of more stringent marketing parameters.

        The Casino Resort maintained an average daily room rate of $196 for each of the years ended December 31, 2002 and 2001. Room revenues during the year ended December 31, 2002 were $206.7 million, representing an increase of $2.5 million when compared to $204.2 million during 2001. The increase in room revenues was the result of an increase of the occupancy of available guestrooms to 95.6% during the year ended December 31, 2002 as compared to 94.6% during 2001.

        Food and beverage revenues were $70.3 million during the year ended December 31, 2002, representing an increase of $8.3 million compared to $62.0 million for 2001. The increase was attributable to higher room occupancy and related banquet sales.

        Mall revenues, which are included in retail and other revenues, were $36.5 million during 2002, compared to $33.5 million during 2001. The increase was attributable to higher foot traffic, additional tenants and increased proceeds from rents calculated on tenant gross revenues.

        Retail and other revenues (excluding the Mall) decreased $3.6 million to $35.9 million in 2002 from $39.5 million in 2001. The decrease was primarily attributable to group cancellation fees of $5.2 million during 2001. Retail and other revenue for 2002 takes into account operating results from the Art of the Motorcycle exhibition at the Guggenheim Las Vegas Museum. The exhibit opened to the public on October 7, 2001 and closed on January 6, 2003.

        Operating Expenses

        Operating expenses (including pre-opening, developmental and corporate expenses) were $424.6 million in the year ended December 31, 2002, representing an increase of $10.0 million when compared to $414.6 million during 2001. The increase in operating expenses was primarily attributable to higher operating revenues and business volumes in all departments of the Casino Resort, increased general and administrative costs and partially offset by reduced advertising costs during 2002. Casino department expenses decreased $20.7 million as a result of reduced drop (table games volume), and reduced casino marketing costs. Room’s department expense increased $3.4 million resulting from higher room occupancy. Food and beverage expense increased $5.6 million as a result of increased food and beverage sales. General and administrative cost increased $7.5 million primarily as the result of increased utility, property tax, and insurance costs.

        Mall operating expenses, which are included in retail and other expenses, were $22.9 million during 2002 compared to $20.9 million during 2001. The increase in Mall operating expenses was primarily attributable to increased utility costs during 2002 as compared to 2001.

        Corporate expense was $11.0 million in 2002, compared with $6.4 million in 2001. The increase was due to increased incentive compensation and transportation costs.

        Pre-opening and developmental expense was $5.9 million as a result of the Company’s pre-development activity associated with the development of the Macau Casino.

        Fixed payment obligations (rent expense) primarily related to the HVAC Plant for the year ended December 31, 2002 were $7.6 million, including $5.2 million for the Casino Resort and $2.4 million for the Mall. Fixed payment obligations were $8.1 million during 2001, including $5.9 million for the Casino Resort and $2.2 million for the Mall.

        Interest Income (Expense)

        Interest expense net of amounts capitalized was $114.4 million for 2002, compared to $110.7 million in 2001. Of the net interest expense incurred during 2002, $105.9 million was related to the Casino Resort (excluding the Mall) and $8.5 million was related to the Mall. The increase in interest expense was attributable to increased borrowings associated with the Refinancing Transactions partially offset by decreases in interest rates on the Company’s variable rate debt during 2002.

        Interest income was $2.6 million and $1.4 million for the years ended December 31, 2002 and 2001, respectively. The increase was due to increased cash balances and restricted cash balances to be used for Phase IA Addition.

Year Ended December 31, 2001 compared to the Year Ended December 31, 2000

        Operating Revenues

        Consolidated net revenues for the year ended December 31, 2001 were $523.9 million, representing a decrease of $57.1 million when compared with $581.0 million of consolidated net revenues during 2000. The decrease in net revenues was primarily due to a decline in casino revenue, offset by increases in hotel and other revenues.

        Casino revenues were $227.2 million in the year ended December 31, 2001, a decrease of $71.9 million from 2000. The decrease was attributable to several factors, including: (1) an unusually low historical table games win percentage (calculated before discounts) of 15.3% during 2001 as compared to 20.5% during 2000 (the table games win percentage is reasonably predictable over time, but may vary considerably during shorter periods); (2) more stringent table games marketing parameters during 2001 that resulted in decreased table games volume; (3) decreased visitor traffic to Las Vegas after the terrorist attacks of September 11, 2001; and (4) table games drop (volume) decreased to $966.6 million in the year ended December 31, 2001 from $1,130.3 million during 2000. Slot handle (volume) in the year ended December 31, 2001 decreased to $1,825.2 billion from $1,939.6 billion reported during 2000; a result of decreased visitor traffic to Las Vegas after September 11, 2001.

        The Casino Resort’s average daily room rates increased to $196 in the year ended December 31, 2001 as compared to $182 in 2000. Room revenues during the year ended December 31, 2001 were $204.2 million, representing an increase of $11.9 million when compared to $192.3 million during 2000. The increase in room rates occurred in all major segments of the Casino Resort’s hotel rooms business, including the mid-week, group and convention business, and the weekend retail business. The occupancy of available guestrooms was 94.6% during the year ended December 31, 2001 compared to 95.2% during 2000.

        Food and beverage revenues were $62.0 million during the year ended December 31, 2001, representing a decrease of $5.1 million compared to $67.1 million for 2000. The decrease was attributable to lower room occupancy and banquet sales as a result of travel disruption to Las Vegas during the fourth quarter of 2001.

        Mall revenues were $33.5 million during 2001, compared to $29.9 million during 2000. The increase was attributable to higher foot traffic, additional tenants and increased proceeds from rents calculated on tenant gross revenues.

        Retail and other revenues increased $4.2 million to $73.0 million in 2001 from $68.8 million in 2000. Other revenue includes $5.3 million of group cancellation fees during the year ended December 31, 2001, including $5.2 million during the fourth quarter of 2001, as compared to $1.9 million during all of 2000. In addition, during the fourth quarter of 2001, the Company added $1.0 million to its provision for bad debts as an estimate of settlement losses associated with $1.9 million of uncollected group cancellation fees.

        Operating Expenses

        Operating expenses (including pre-opening, developmental and corporate expenses) were $414.6 million in the year ended December 31, 2001, representing a decrease of $29.6 million when compared to $444.2 million during 2000. The decrease in operating expenses was primarily attributable to lower operating revenues and business volumes in all departments of the Casino Resort and reduced general & administrative costs during 2001. Provision for bad debts for the year ended December 31, 2001 was $20.2 million compared to $19.3 million during 2000. The increase was primarily attributable to estimates of losses associated with hotel receivables and group cancellation fees during the fourth quarter of 2001.

        Mall operating expenses were $20.9 million during 2001 compared to $19.3 million during 2000. The increase in Mall operating expenses was primarily attributable to increased advertising costs during 2001 as compared to 2000.

        Corporate expense was $6.4 million in 2001, compared with $6.3 million in 2000.

        Fixed payment obligations primarily related to the HVAC Plant for the year ended December 31, 2001 were $8.1 million, including $5.9 million for the Casino Resort and $2.2 million for the Mall. Fixed payment obligations were $8.7 million during 2000, including $6.5 million for the Casino Resort and $2.2 million for the Mall.

        Interest Income (Expense)

        Interest expense net of amounts capitalized was $110.7 million for 2001, compared to $119.8 million in 2000. Of the net interest expense incurred during 2001, $95.6 million was related to the Casino Resort (excluding the Mall) and $15.1 million was related to the Mall. The decrease in interest expense was attributable to decreases in interest rates on the Company’s variable rate debt during 2001 and capitalization of $2.0 million of interest in connection with current construction projects.

        Interest income was $1.4 million and $1.8 million for the years ended December 31, 2001 and 2000, respectively.

Other Factors Affecting Earnings

        Depreciation expense for the year ended December 31, 2002 was $43.6 million as compared to $40.8 million for the year ended December 31, 2001. The increase was attributable to placing capital improvement projects into service during the fourth quarter of 2001, including the Guggenheim Museum projects.

        During the years ended December 31, 2002 and December 31, 2001, $23.3 million and $20.8 million, respectively, were accrued on the Series B preferred interest in Venetian (the “Series B Preferred Interest”) related to the contributions made.

        During early 2000, the Company initiated a change to its business strategy as it relates to premium casino customers and marketing to foreign premium casino customers. The Company has generally raised its betting limits for table games to be competitive with other premium resorts on the Strip. There are additional risks associated with this change in strategy, including risk of bad debts, risks to profitability margins in a highly competitive market and the need for additional working capital to accommodate possible higher levels of trade receivables and foreign currency fluctuations associated with collection of trade receivables in other countries. The Company has opened domestic and foreign marketing offices and bank collection accounts in several foreign countries to accommodate this change in business strategy, thereby increasing marketing costs. The Company continually evaluates its costs associated with marketing to the various segments of the premium casino customer market and has recently increased selectivity of casino customers to reduce variable marketing and incentive costs.

Liquidity and Capital Resources

        Cash Flow and Capital Expenditures

        As of December 31, 2002 and December 31, 2001, the Company held unrestricted cash and cash equivalents of $93.7 million and $54.9 million, respectively. Net cash provided by operating activities for the year ended December 31, 2002 was $78.1 million, compared with $50.8 million for 2001. The Company’s operating cash flow in 2002 was positively impacted as compared to the prior year primarily because of the $37.8 million increase in operating income offset by a net decrease in accounts payable and accrued liabilities. Net trade receivables were $53.3 million as of December 31, 2002 and $57.1 million as of December 31, 2001.

        Capital expenditures during the year ended December 31, 2002 were $135.8 million, of which $106.9 million was attributable to construction of the Phase IA Addition and $2.4 million was attributable to the Macau Casino project with the balance having been incurred for operating capital expenditures at the Casino Resort. The Company expects capital expenditures in 2003 to total approximately $347.9 million including Macau Casino construction cost of $160.0 million, Phase IA construction cost of $149.0 million, HVAC Plant Expansion cost of $8.9 million and $30.0 million for operating capital expenditures at the Casino Resort.

        The Company also held restricted cash balances of $105.3 million as of December 31, 2002. Of this amount, $101.2 million was held in restricted accounts and invested in cash or permitted investments by a disbursement agent for the Senior Secured Credit Facility lenders until required for Phase IA Addition project costs under the disbursement terms of the Senior Secured Credit Facility. In addition to the cash in the disbursement account, the Senior Secured Credit Facility’s senior secured delayed draw facility (the “Term A Facility”) provides for a delayed draw term loan of $50.0 million which the Company expects to draw upon in full by June 4, 2003 to pay Phase IA Addition project costs. The Company estimated that the cost to complete the Phase IA Addition as of December 31, 2002 was $149.0 million. In addition, the Company will spend $8.9 million to pay for the HVAC Plant Expansion. The Company expects completion to occur by June 2003. The Company currently anticipates that the funds in the disbursement account and the delayed draw facility will be sufficient to pay for all of the remaining costs of the Phase IA Addition (excluding the HVAC Plant expansion). The Company expects that the HVAC Plant Expansion will be funded by either a new $15 million furniture, fixtures and equipment debt facility or by operating cash flow.

        Aggregate Indebtedness and Fixed Payment Obligations to the HVAC Provider

        The Company’s total long-term indebtedness and its fixed payment obligations to Southern Energy Solutions, the provider of heating and air conditioning to the Casino Resort and the Expo Center, are summarized below for the twelve month periods ended December 31:

        Under the terms of its existing indebtedness, the Company has debt principal payments due aggregating $2.5 million during the next twelve months, representing principal payments on the Senior Secured Credit Facility. Based on current outstanding indebtedness and current interest rates on the Senior Secured Credit Facility and the Secured Mall Facility, the Company has estimated total interest payments during the next twelve months (excluding noncash amortization of debt offering costs) of approximately $105.3 million for indebtedness secured by the Casino Resort and approximately $4.0 million for indebtedness secured by the Mall . In addition, Venetian Macau is in the process of seeking an additional $120.0 million of indebtedness to complete the Macau Casino which would require additional interest expense. See “Item 8 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 8 – Long-Term Debt.”

        The Company also has fixed payments obligations due during the next twelve months of $7.7 million under its energy service agreements with the HVAC Provider. The total remaining payment obligation under this arrangement is $49.8 million, payable in equal monthly installments during the period of January 1, 2003 through July 1, 2009.

        Refinancing Transactions

        On June 4, 2002, the Company issued $850.0 million in aggregate principal amount of Mortgage Notes in a private placement offering and entered into the Senior Secured Credit Facility in an aggregate amount of $375.0 million and the Secured Mall Facility in the aggregate amount of $105.0 million (subsequently increased to $120.0 million on June 28, 2002). The Company used the proceeds of the Refinancing Transactions to repay, redeem or repurchase all of its outstanding indebtedness (including the Old Mortgage Notes, the Old Subordinated, the November 1997 Bank Credit Facility (the “Bank Credit Facility”), the facility providing for financing for certain furniture, fixtures, and equipment and an electrical substation (the “FF&E Facility”), the advance of $23.5 million under the Principal Stockholder’s completion guaranty, the $105.0 million tranche A take-out loan to the New Mall Subsidiary (the “Tranche A Take-out Loan”) and the $35.0 million tranche-B take out loan to the New Mall Subsidiary (the “Tranche B Take-out Loan”), the Phase II Subsidiary’s unsecured bank line of credit and the Phase II Subsidiary’s term and revolving loan (the “Phase II Subsidiary Credit Facility”), to finance the construction and development of the Phase IA Addition and to pay all fees and expenses associated with the Refinancing Transactions. In addition, the Principal Stockholder’s completion guarantee relating to the construction of the Casino Resort was terminated upon the consummation of the Refinancing Transactions and the remaining cash collateral was returned to the Principal Stockholder. In connection with the Refinancing Transactions, the Company incurred a loss on early retirement of indebtedness of $51.4 million during the year ended December 31, 2002. See “Item 8 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 8 – Long-Term Debt.”

        For the next twelve months, the Company expects to fund Casino Resort operations, capital expenditures, the Macau casino construction, Internet gaming development activities and debt service requirements from existing cash balances, operating cash flow, borrowings under the Revolving Facility to the extent that funds are available, borrowings by Venetian Macau and other unrestricted subsidiaries, drawings under the Term A Facility and distributions of excess cash from Grand Canal Shops II, LLC (the “Mall II Subsidiary”) to Venetian to the extent permitted under the terms of the Company’s indebtedness. As of December 31, 2002, there was $75.0 million available for borrowing under the Revolving Facility and $50.0 million available under the Term A Facility. As discussed below, the availability under the Revolving facility will decrease as loans are made under the new $50 million credit agreement entered into on March 27, 2003 by one of the Company’s Macau subsidiaries.

        The Company’s existing debt instruments contain certain restrictions that, among other things, limit the ability of the Company and/or certain subsidiaries to incur additional indebtedness, issue disqualified stock or equity interests, pay dividends or make other distributions, repurchase equity interests or certain indebtedness, create certain liens, enter into certain transactions with affiliates, enter into certain mergers or consolidations or sell assets of the Company without prior approval of the lenders or noteholders. Financial covenants included in the Senior Secured Credit Facility include total debt to EBITDA ratios, EBITDA to interest coverage ratios, minimum net worth covenants and maximum capital expenditure limitations. The financial covenants in the Senior Secured Credit Facility involving EBITDA are applied on a rolling four-quarter basis. As of December 31, 2002, the Company was in compliance with all required covenants and ratios under its current debt instruments. See “Item 8 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 8 – Long-Term Debt.”

        Macau Casino Project

        The Company is currently constructing a casino in Macau with an anticipated completion date of February 2004 and tentatively plans to build a 500-suite hotel, casino and convention center complex, with a Venetian-style theme similar to that of the Company’s Las Vegas property. Under the terms of Venetian Macau’s agreements with the government of Macau, Venetian Macau has certain financial obligations to the Government of Macau or is obligated to pay for certain costs of developing and constructing the Macau Casino and other projects in Macau. Venetian Macau is committed to invest 4.4 billion Macau patacas (approximately $531.7 million at exchange rates as of December 31, 2002) under its agreement with the government of Macau in various development projects until March 31, 2007. To support this obligation, Venetian Macau has caused a Macau bank to guarantee 300 million Macau patacas (approximately $36.3 million at exchange rates as of December 31, 2002) on its behalf and Lido Casino Resort Holding Company, LLC (an unrestricted subsidiary of the Company) has guaranteed 200 million Macau patacas (approximately $24.2 million at exchange rates as of December 31, 2002) of the legal and contractual liabilities of Venetian Macau to the Macau government until March 31, 2007. The Company expects to use cash received from the following sources to fund the various Macau projects:

        Specifically, the Company estimates the cost to complete the Macau Casino to be $210.0 million and expects completion to occur by February 2004. The Senior Secured Credit Facility and the Indenture relating to the Mortgage Notes limits the Company’s ability to make investments in its Macau subsidiaries. As of December 31, 2002, the Company has invested $34.4 million in its Macau subsidiaries and expects to invest an additional $5.6 million. Of this invested amount, $25.6 million remains on deposit in Venetian Macau bank accounts as of December 31, 2002. On March 27, 2003, Venetian Venture Development Intermediate Limited (“Venetian Intermediate”), a subsidiary of the Company, entered into a credit agreement (“Venetian Intermediate Credit Agreement”) with The Bank of Nova Scotia to provide $50.0 million of financing for the Macau Casino. Venetian Intermediate, a wholly-owned indirect subsidiary of Venetian, owns 100% of Venetian Macau. The obligations under the loans to be made under Venetian Intermediate Credit Agreement will be guaranteed by the Company and Venetian and supported by letters of credit to be issued under the Senior Secured Credit Facility in favor of the Venetian Intermediate Credit Agreement lenders. As these loans are made, the letters of credit will reduce the amounts available for working capital loans under the Revolving Facility on a dollar for dollar basis from the $75.0 million of current availability to $25.0 million. The amounts outstanding under the Venetian Intermediate Credit Facility bear interest at the base rate or the adjusted Eurodollar rate plus 0.5% per annum. Interest is payable on base rate loans on a monthly basis and is payable on Eurodollar loans at the end of the applicable interest period, and there is no scheduled principal amortization. The credit facility is due in full March 27, 2006. As of March 31, 2003, the credit facility remains undrawn. In addition, Venetian Macau is currently negotiating to obtain $120.0 million in additional debt financing (“Proposed Venetian Macau Financing Agreement”). There can be no assurance that financing will be available to the Company to complete the Macau Casino, and, if available, that the financing will be on terms favorable to the Company. The proceeds from the Venetian Intermediate Credit Agreement, the Proposed Venetian Macau Credit Agreement and the direct investments of $40.0 million from Venetian will be used to fund the $210.0 million total anticipated cost of the Macau Casino.

        Through December 31, 2002, the Company had incurred pre-opening and developmental expenses of $5.9 million and construction costs of $4.8 million, in connection with the Macau Casino project.

        Venetian Macau, Venetian Intermediate and the Company’s other Macau subsidiaries are not guarantors under the Mortgage Notes or the Senior Secured Credit Facility and, subject to certain limited exceptions, are not restricted subsidiaries under the Indenture or the Senior Secured Credit Facility.

        Phase II Resort

        The Company has not yet set a date to begin construction of the Phase II Resort. If the Company determines to construct the Phase II Resort, it will be required to raise substantial debt and/or equity financings. Currently, the Company has no commitments to fund the hard construction costs of the Phase II Resort. In addition, the development of the Phase II Resort may require obtaining additional regulatory approvals. The Company’s debt instruments limit its ability to guarantee or otherwise become liable for any indebtedness of the Phase II Subsidiary. These debt instruments also restrict the Company’s and its subsidiaries’ ability to sell or otherwise dispose of the capital stock of the Phase II Subsidiary, including a sale to the Principal Stockholder or to any of his affiliates. In addition, the Indenture allows the Company to make investments of up to $20.0 million for the development of the Phase II Resort and to incur up to $20.0 million of additional debt to fund such investment. The Phase II Subsidiary is an unrestricted subsidiary that is not subject to the terms of the Indenture or the Senior Secured Credit Facility and is not a guarantor under the Mortgage Notes or the Senior Secured Credit Facility.

        Litigation Contingencies and Available Resources

        The Company is a party to certain litigation matters and claims related to the construction of the Casino Resort. If the Company is required to pay any of the Construction Manager’s contested construction costs (the “Contested Construction Costs”) which are not covered by the Insurance Policy, the Company may use cash received from the following sources to fund such costs: (i) the LD Policy; (ii) the Construction Manager, Bovis and P&O pursuant to the Construction Management Contract, the Bovis Guaranty and the P&O Guaranty, respectively; (iii) third parties, pursuant to their liability to the Company under their agreements with the Company; (iv) amounts received from the Phase II Subsidiary for shared facilities designed and constructed to accommodate the operations of the Casino Resort and the Phase II Resort; (v) borrowings under the Revolving Facility; (vi) additional debt or equity financings; and (vii) operating cash flow. If the Company were required to pay substantial Contested Construction Costs, and if it were unable to raise or obtain the funds from the sources described above, there could be a material adverse effect on the Company’s financial position, results of operations or cash flows.

        If the Company is required to pay certain significant contested construction costs, or if the Company is unable to meet its debt service requirements, the Company will seek, if necessary and to the extent permitted under the Indenture and the terms of the Senior Secured Credit Facility or any other debt instruments then outstanding, additional financing through bank borrowings or debt or equity financings. Also, there can be no assurance that new business developments or unforeseen events will not occur resulting in the need to raise additional funds. There also can be no assurance that additional or replacement financing, if needed, will be available to the Company, and, if available, that the financing will be on terms favorable to the Company.

Recent Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board issued Statement No. 143 (“SFAS 143”), “Accounting for Obligations Associated with the Retirement of Long-Lived Assets.” The objectives of SFAS 143 are to establish accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. SFAS 143 is effective for fiscal years beginning after June 15, 2002.

        In June 2002, the Financial Accounting Standard Board issued Statement No. 146 (“SFAS 146”) “Accounting for Costs Associated with Exit or Disposal Activities.” The provisions of SFAS 146 become effective for exit or disposal activities commenced subsequent to December 31, 2002 and the Company does not expect any impact on its financial condition, results of operations or cash flows.

        The Company does not expect the impact of the adoptions of SFAS 143 and SFAS 146 to have a material impact on its financial condition, results of operations or cash flows.

        In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that is has issued. It also clarifies (for guarantees issued after January 1, 2003) that a guarantor is required to recognize at the inception of a guarantee, a liability for the fair value of the obligations undertaken in issuing the guarantee. At December 31, 2002, the Company does not have any guarantees outside of its consolidated group and accordingly does not expect the adoption of FIN 45 to have a material impact on its financial condition, results of operations or cash flows. Disclosures concerning guarantees are found in Notes 8 and 13.

        In December 2002 the Financial Accounting Standards Board issued Statement No. 148 (“SFAS 148”) “Accounting for Stock-Based Compensation.” The provisions of SFAS 148 became effective December 15, 2002. The Company has adopted the disclosure requirements of SFAS 148.

        In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” This interpretation addresses the requirements for business enterprises to consolidate related entities in which they are determined to be the primary economic beneficiary as a result of their variable economic interests. The interpretation is intended to provide guidance in judging multiple economic interest in an entity and in determining the primary beneficiary. The interpretation outlines disclosure requirements for VIEs in existence prior to January 31, 2003, and outlines consolidation requirements for VIEs created after January 31, 2003. The Company has reviewed its major relationships and its overall economic interests with other companies consisting of related parties, companies in which it has an equity position and other suppliers to determine the extent of its variable economic interest in these parties. The Company believes it has appropriately reported the economic impact and its share of risks of its commercial relationships through its equity accounting along with appropriate disclosure of its other commitments.

Special Note Regarding Forward-Looking Statements

        Certain statements in this section, the risk factors set forth in “Item 1–Business” of this Annual Report on Form 10-K for the year ended December 31, 2002 and elsewhere in this Annual Report on Form 10-K (as well as information included in oral statements or other written statements made or to be made by the Company) constitute “forward-looking statements.” Such forward-looking statements include the discussions of the business strategies of the Company and expectations concerning future operations, margins, profitability, liquidity and capital resources. In addition, in certain portions of this Form 10-K, the words: “anticipates”, “believes”, “estimates”, “seeks”, “expects”, “plans”, “intends” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Although the Company believes that such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risks associated with entering into new construction and new ventures, including the Phase IA Addition and the Macau Casino, increased competition and other planned construction in Las Vegas, including the opening of a new casino resort on the site of the former Desert Inn and upcoming increases in meeting and convention space, the completion of infrastructure projects in Las Vegas, government regulation of the casino industry, including gaming license approvals and regulation in foreign jurisdictions, the legalization of gaming in certain jurisdictions, such as Native American reservations in the States of California and New York and regulation of gaming on the Internet, leverage and debt service (including sensitivity to fluctuations in interest rates and other capital markets trends), uncertainty of casino spending and vacationing at casino resorts in Las Vegas, disruptions or reductions in travel to Las Vegas due to the September 11th attacks, the war with Iraq and any future terrorist incidents, new taxes or changes to existing tax rates, fluctuations in occupancy rates and average daily room rates in Las Vegas, demand for all-suites rooms, the popularity of Las Vegas as a convention and trade show destination, insurance risks (including the risk that the Company has not obtained sufficient coverage against acts of terrorism or will only be able to obtain additional coverage at significantly increased rates), litigation risks, including the outcome of the pending disputes with the Construction Manager and its subcontractors, and general economic and business conditions which may impact levels of disposable income, consumer spending and pricing of hotel rooms.

ITEM 7A.–QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. The Company’s primary exposure to market risk is interest rate risk associated with its long-term debt. The Company attempts to manage its interest rate risk by managing the mix of its long-term fixed-rate borrowings and variable rate borrowings, and by use of interest rate cap and floor agreements. The ability to enter into interest rate cap and floor agreements allows the Company to manage its interest rate risk associated with its variable rate debt.

        The Company does not hold or issue financial instruments for trading purposes and does not enter into deliverable transactions that would be considered speculative positions. The Company’s derivative financial instruments consist exclusively of interest rate cap and floor agreements, which do not qualify for hedge accounting. Interest differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense.

        To manage exposure to counterparty credit risk in interest rate cap and floor agreements, the Company enters into agreements with highly-rated institutions that can be expected to fully perform under the terms of such agreements. Frequently, these institutions are also members of the bank group providing the Company’s credit facility, which management believes further minimizes the risk of nonperformance.

        The table below provides information about the Company’s financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents notional amounts and weighted average interest rates by contractual maturity dates for the twelve month periods ended December 31:

        Foreign currency translation gains and losses were not material to the Company’s results of operations for the year ended December 31, 2002, but may be in future periods in relation to activity associated with the Macau venture.

        See also “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” and ” Item 8 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 8 – Long-Term Debt.”

ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Financial Statements:

The financial information included in the financial statement schedule should be read in conjunction with the consolidated financial statements. All other financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements or the notes thereto.

Report of Independent Accountants

To the Directors and Stockholders of Las Vegas Sands, Inc.

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders’ equity (deficit) and of cash flows present fairly, in all material respects, the financial position of Las Vegas Sands, Inc. and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As more fully described in Note 2, the Company changed its method of accounting for losses on early retirement of debt in connection with its adoption of Financial Accounting Standards Board Statement No. 145.

PricewaterhouseCoopers LLP

Las Vegas, Nevada
February 5, 2003, except for Note 8 – Venetian Intermediate
Credit Facility and Note 13 – Macau Casino Project and
Internet Gaming, as to which the date is March 27, 2003

LAS VEGAS SANDS, INC.

Consolidated Balance Sheets
(Dollars in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

LAS VEGAS SANDS, INC.

Consolidated Statements of Operations
(In thousands, except per share data)

The accompanying notes are an integral part of these consolidated financial statements.

LAS VEGAS SANDS, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)
(Dollars in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

LAS VEGAS SANDS, INC.

Consolidated Statements of Cash Flows
(Dollars in thousands)